Cansortium has a huge upside, says Beacon

Ahead of fourth quarter financials due next Monday from Cansortium (Cansortium Stock Quote, Charts, News, Analysts, Financials CSE:TIUM.U), Beacon Securities analyst Russell Stanley delivered an update on Thursday and maintained a “Buy” rating on the stock. 

Cansortium is a vertically integrated cannabis company operating in the US states of Florida, Pennsylvania and Texas and sells the Fluent brand of products. Last month, the company opened its 33rd retail cannabis outlet nationwide in Jacksonville, Florida, a Fluent store that represents Cansortium’s third medical cannabis dispensary in Jacksonville and 30th across the state.

As to the Q4 2022 results, Stanley said he is expecting $24 million in revenue and $8 million in adjusted EBITDA, putting the company at a full 2022 count of $88 million in revenue and $37 million in EBITDA. Those numbers compare to 2021’s $65 million in revenue and $20 million in EBITDA. (All figures in US dollars except where noted otherwise.)

Stanley said Cansortium held a four per cent market share in both Florida’s flower and oil-based product sales over the fourth quarter, according to sales volume data from the state. The analyst said the opening of its 29th and 30th stores in the state this year should support further topline growth over 2023.

Calling TIUM the most Florida-levered publicly traded cannabis co (with 80 per cent of its revenue and earnings coming from the state), Stanley updated on the move to legalize adult-use in Florida. He said as of the end of March, the valid signature count from the Smart and Safe Florida campaign had reached 636,000. That gives it almost three times the signatures needed to trigger a Supreme Court review of the proposed ballot language but it’s also over 70 per cent of the way to securing a spot on the November 2024 ballot, assuming it clears a Supreme Court review.

“We therefore believe the campaign is in excellent shape and expect the Supreme Court review to occur closer to the deadline (April 2024),” Stanley wrote. “While the Supreme Court rejected two adult use initiatives in 2021 over the proposed ballot language, the new language was crafted to address the issues then raised by the Court. We therefore believe it has reasonably good odds of clearing the review and securing a ballot spot.”

With the update, Stanley reiterated a C$1.00 target on TIUM, which at press time represented a projected one-year return of 1,233 per cent.

Stanley said TIUM currently trades at 2.6x 2023 adjusted EBITDA, which is a 58 per cent discount to the 6.2x average of its peer group.

“While this is a smaller/less liquid name, it also has one of the strongest EBITDA/cash flow margin profiles in the space. Its high leverage to Florida, where strong AU progress is being made, and unique position in Texas as one of just three licensees, makes it an excellent acquisition target,” he wrote.