Top and bottom line beats are keeping Beacon Securities analyst Russell Stanley singing the praises of Florida-focused US cannabis name Cansortium (Cansortium Stock Quote, Charts, News, Analysts, Financials CSE:TIUM.U-C). Stanley reviewed TIUM’s latest quarter in a client update on Thursday where he reiterated a “Buy” rating on the stock, saying Cansortium continues to deliver top-tier performance in the cannabis space.
Miami-based Cansortium, which has licenses and operations in Florida, Pennsylvania and Texas and flies the FLUENT brand of products and stores, announced its first quarter 2023 results on Wednesday. The company reported revenue up 12 per cent year-over-year to $22.1 million and adjusted EBITDA up 56 per cent to $9.7 million. Cash flow from operations rose by 20 per cent to $5.1 million, and the company finished the quarter with $9.5 million in cash versus $57.9 million in debt. (All figures in US dollars except where noted otherwise.)
“We are pleased to once again report double-digit revenue growth and adjusted EBITDA margin expansion, coupled with another period of strong cash flow generation in the face of broader industry challenges,” said CEO Robert Beasley in a press release.
“Our new store openings in Florida, continually improving our cultivation and increasing the mix of high-THC products are all contributing to our growth and profitability improvements in the state,” he said.
Stanley said the $22.1 million in revenue and $9.7 million in EBITDA beat his estimates of $20.4 million and $4.7 million, respectively, with Stanley’s estimates being the only ones on TIUM’s quarter, according to FactSet.
“While TIUM is an IFRS reporting issuer, and its reported EBITDA margins are likely higher than they would be under US GAAP, we view TIUM’s reported EBITDA as high quality given very limited use of discretionary/other add-backs. TIUM also produced operating cash flow of $6.5M before working capital (a 30 per cent margin), and $5.1 million after net working capital investments (a 23 per cent margin). While we have not yet compiled our quarterly Report Card for US operators, we expect these EBITDA/cash flow margins to rank at-or-near the top spot in the space,” Stanley wrote.
Stanley said at 2.2x his 2024 EV/adjusted EBITDA forecast, TIUM is trading at a 51 per cent discount to the 4.5x average among CSE-listed US cannabis operators.
With his “Buy” rating, Stanley maintained a one-year target price of C$1.00 per share, reflective of a projected return of 1150 per cent at the time of publication.
“We continue to see TIUM as a compelling investment opportunity given its attractive valuation (even by US cannabis standards) based on estimates with considerable upside potential,” he said.
“Management has consistently indicated it continues to look at markets outside of its current footprint. We also believe TIUM would make an attractive acquisition candidate for any company looking to add highly profitable operations in Florida,” Stanley wrote.