Village Farms shakes up management, keeps “Buy” rating at Roth

The exit of a key person at Village Farms (Village Farms Stock Quote, Chart, News, Analysts, Financials Nasdaq:VFF) isn’t shaking Roth analyst Scott Fortune’s faith in the stock.

On August 22, VFF announced that Mandesh Dosanjh will step down from his role at Pure Sunfarms and will be replaced by Orville Bovenschen.

“Orville takes on leadership of Pure Sunfarms as we are executing on our strategy to meet the evolving preferences of the cannabis market in pursuit to be the long-term, profitable market leader,” VFF CEO Michael DeGiglio said. “Orville has a strong track record of delivering operational efficiency and has led multiple initiatives that have improved quality and consistency across all Pure Sunfarms’ brands. Having worked closely with Orville for several years, I have the utmost confidence in his ability to lead one of the deepest, most experienced and most successful management groups in the cannabis industry, who, together with the Rose LifeScience team, are building on our dominant position in dried flower and leading brands to take our Canadian Cannabis business to the next level. I would like to thank Mandesh for the five years he dedicated to leading Pure Sunfarms, one of the largest, lowest cost cannabis operations in the world, and contributing to our top-three market share position nationally,” added Mr. DeGiglio. “He has built upon our rock-solid foundation, including a talented team with deep consumer packaged goods experience, from which we will continue to build and grow. We appreciate his ongoing support throughout the transitional period and wish him the best as he pursues his future endeavors.”

The analyst says Village Farms has become large enough and mature enough to handle the loss of Dosanjh.

“While we believe the loss of Mandesh will be missed, his solid operational processes and established CPG team will remain as the foundation at PSF, which VFF is leveraging to become a leading low-cost global cannabis producer, with a world-class, international cannabis platform. Mr. Dosanjh was instrumental in building out PSF to be one of Canada’s lowest-cost producers, and we believe his insights played a key role in PSF obtaining leading dried flower share across several Canadian provinces. As consolidation of Canadian operators continues with many LPs shuttering highcost cultivation or moving to asset-light models, we believe VFF’s long-term vision (20%-25% market share of production) is starting to play out with more interest in wholesale biomass from the low-cost, quality supplier in PSF. VFF remains one of the few large-scale Canadian producers to grow its market share over the past 12 months, and we view the decision to focus internationally as timely with several markets set to inflect overseas. As international sales begin to ramp, we believe PSF should become a key supplier to these new EU countries coming online, given its lean operations and EU GMP infrastructure.”

In a research update to clients August 23, Fortune maintained his “Buy” rating and one-year price target of $1.75 on VFF.

Fortune believes VFF will post EBITDA of $9.7-million on revenue of $287.2-million in fiscal 2023. He expects those numbers will improve to EBITDA of $13.2-million on a topline of $296.1-million the following year.