Ahead of the company’s second quarter results, which are due Wednesday morning, Beacon Securities analyst Russell Stanley thinks there is huge upside in VEXT Science (VEXT Science Stock Quote, Chart, News, Analysts, Financials CSE:VEXT)
On Wednesday at 8am, EST, VEXT will host a conference call to discuss its second quarter results.
Stanley thinks VEXT will post EBITDA of $2.9-million on revenue of $9.2-million. He also thinks the company will post operating cash flow of $2.3-million before working capital and $2.0-million after.
The analyst says VEXT offers the best exposure to Ohio in the cannabis space.
“We continue to view VEXT as the public company offering the highest leverage to Ohio, with approximately 60% of our F2024 adjusted EBITDA forecast coming from OH,” Stanley wrote. “While VEXT is not the largest player statewide in absolute terms, the mid/large MSOs with larger operations also have more diversified revenue bases. Last week, the Ohio Secretary of State announced that the Coalition to Regulate Marijuana Like Alcohol had secured enough signatures to lock down a spot on the ballot for this November. Importantly, the measure is an initiated statute, which means the Republican-led legislature can modify or repeal the law if it passes. While Governor DeWine and Senate President Huffman reportedly oppose legalization, the Senate President has previously indicated that he expects the legislature to respect the will of the people, according to Cincinatti.com. Recent polling indicates 58% of likely voters support legalization. While voter turnout might ordinarily be soft for November 2023, voters will also be asked to vote on a proposal to amend the state constitution to legalize and protect reproductive healthcare choices, including abortion. This should help drive voter turnout. Ohio is the
7th largest state in the US with a population of 11.7M. The proposed adult use program is geared to allow incumbent medical operators into the adult-use market early. With the Q2 results/conference call, we will be looking for an update on VEXT’s operations and pending transactions, following which the company will be vertically integrated with two dispensaries. We note that our forecast period extends to F2024 and does not assume adult-use legalization in OH.”
In a research update to clients August 18, Stanley maintained his “Buy” rating and one-year price target of $1.00 on VEXT, implying a return of 365 per cent at the time of publication.
Stanley thinks VEXT will post Adjusted EBITDA of $13-million on revenue of $41-million in fiscal 2023. He expects those numbers will improve to EBITDA of$23-million on a topline of $65-million the following year.
The analyst says VEXT is trading at a 29 per cent discount to its peer group.
“VEXT is now trading at 3.4x our F2024 adjusted EBITDA forecast,” he added. “This represents a 29% discount to the 4.8x average amongst CSE-listed US operators. Potential company-specific catalysts include the Q2 results/commentary Wednesday, completion of the Ohio transactions, and further buildout updates.”