The Canadian cannabis space has had its ups and downs over the years and that includes more recently when the sector went into a prolonged slump starting early in 2021. But the still-developing industry still has its bright spots, and according to Echelon Capital Markets analyst Andrew Semple that includes cannabis retail name High Tide Inc (High Tide Stock Quote, Charts, News, Analysts, Financials TSX:HITI). Semple delivered an update to clients on Monday where he reasserted his “Speculative Buy” rating on HITI, saying that with a new equity raise under its belt High Tide is ready to pursue its growth objectives, which include expanding its store count across the country. Calgary-based High Tide, a retailer, distributor and e-commerce provider of adult-use cannabis products and accessories with 128 stores currently open, announced last Friday the closing of an equity financing round raising $11.5 million in gross proceeds. The previously announced bought deal included about five million units pegged at $2.32 per unit with each unit consisting of one share and one warrant and was led by Echelon Wealth Partners. High Tide said it will use the proceeds for constructing and opening new stores (with a target of 150 open by the end of 2022), repayment of certain debts and working capital. Semple said the equity raise will also give HITI additional capacity for M&A and he noted that High Tide announced a series of tuck-in retail store acquisitions this year at valuation multiples between 3.5x and 4.0x annualized last quarter EBITDA, which the analyst said is highly accretive to its 2022 and 2023 EBITDA multiples, even at its lower share price. “We believe High Tide’s balance sheet is now much stronger following this equity financing. We forecast the Company to end FQ322 with net debt of only $10 million, or just 0.7x turns to our 2022E EBITDA forecast. Assuming the connectFirst transaction closes by QE, High Tide could have access to over $45 million of potential liquidity (estimated FQ322 QE cash balance of $16 million, plus $15 million connectFirst term facility, and another $15 million connectFirst acquisition facility),” Semple wrote. Semple said High Tide’s tighter liquidity profile prior to the new financing might have been a barrier to a higher share price rerating for the stock, and that with the raise now behind it, HITI management can focus on its accretive growth objectives which in Semple’s opinion will reduce downside scenarios related to the connectFirst deal and create value for shareholders over the long term. High Tide rose to $15.00 per share in February of last year, but that’s when the market turned on pot stocks, in HITI’s case, gradually taking it down to where it presently trades just above $2. But Semple sees better days ahead and is pairing his “Speculative Buy” rating with a 12-month target price of $12.00 (previously $14.00), which at press time translated to a projected return of 485 per cent. The drop in his target reflects the equity raise’s impact on his discounted cash flow valuation. At the same time, Semple said his model currently doesn’t incorporate a potential acceleration in organic revenue or acquisitive growth down the line related to the additional capital, as he has left his revenue and earnings estimates as is. “We believe this indicates our model has become more conservative, with room for upside surprise. We also appreciate the better risk/reward tradeoff, with reduced near-term liquidity risk but still plentiful upside. We note the potential for additional upside to our model as High Tide makes accretive acquisitions, and with further updates to its unique discount club model progress. High Tide remains our highest conviction investment idea in Canadian cannabis,” Semple wrote. By the numbers, Semple is calling for HITI to generate full fiscal 2022 (year end October 31) revenue and adjusted EBITDA of $338.8 million and $14.6 million, respectively, and fiscal 2023 revenue and adjusted EBITDA of $471.8 million and $31.4 million, respectively. Last month, High Tide reported its second quarter fiscal 2022 earnings, showing revenue of $81.0 million compared to $40.9 million a year earlier and adjusted EBITDA of $2.4 million compared to $3.0 million a year earlier. The company said the drop in earnings came as a result of retail seasonality. High Tide’s Cabanalytics data sales were $5.1 million for the quarter and management said its discount club model is performing well with a 48 per cent increase in same-store sales. “While we aggressively gain retail market share in Canada ahead of our peer group, we have remained adjusted EBITDA positive for the ninth straight quarter,” said Raj Grover, President and CEO, in a press release. “Although we are pleased with our EBITDA of $2.4 million this quarter, we highlight that as the only pure-play cannabis retailer trading on Nasdaq, direct ongoing costs incurred associated with our Nasdaq listing amounted to approximately $750,000 this quarter. Our continued EBITDA positivity is a critical point for us, as we are steadily growing at the same time when many of our publicly-traded and private peers are facing fierce challenges and slowing down,” he said.