Cansortium is a takeover target, Beacon says

Ahead of the company’s second quarter results, Beacon Securities analyst Russell Stanley is maintaining his bullish stance on Cansortium (Cansortium Stock Quote, Chart, News, Analysts, Financials CSE:TIUM.U)

On August 28, after the market close, TIUM.U will posts its second quarter results and host a conference call. Stanley broke down what he is looking for.

“We are looking for revenue/adjusted EBITDA of $26M/$11M (a 43% margin), and ours are the only current estimates for Q2 according to FactSet. Our estimates contemplate a 16% q/q increase in revenue from $22M in Q1. During Q2/23, TIUM flower sales volumes increased 29% (allowing TIUM to inch up to 6th largest by volume in Florida), partially offset by a 3% decline in oil-based product sales. We attribute the q/q growth to a recovery following disruptions caused by last fall’s hurricane activity, as well as ongoing operational improvements. As discussed in our last report card, TIUM is one of just two public companies to rank in the top five across all three margin metrics we track (adjusted EBITDA, operating cash flow before and after working capital). We expect TIUM to report cash used for operations of $3M, with seasonally heavy tax payments prompting an $8M net working capital investment that more than offsets $5M in operating cash flow before w/c. ”

In a research update to clients August 25, Stanley maintained his “Buy” rating and one-year price target of $1.00 on Cansortium, implying a return of 1567 per cent at the time of publication.

The analyst thinks the company will post Adjusted EBITDA of $44-million on revenue of $101-million in fiscal 2023. He expects those numbers will improve to EBITDA of $55-million on a topline of $125-million the following year.

Stanley noted that TIUM.U is trading at a 56 per cent discount to its peers, making it an attractive acquisition target.

“TIUM now trades at 2.1x our F2024 adjusted EBITDA forecast. This represents a 56% discount to the 4.8x average amongst CSE-listed US operators. Potential company-specific catalysts include the Q2 results on Monday, further buildouts, and M&A activity. We also continue to believe TIUM would be an excellent acquisition candidate for companies looking for (additional) exposure to Florida.”