A maturing North American cannabis market is making it easier to pick out the strong names and one of those would be Cansortium (Cansortium Stock Quote, Chart, News, Analysts, Financials CSE:TIUM.U) says Paradigm Capital analyst Corey Hammill. In an industry report on Tuesday, Hammill said Cansortium trades at a deep discount to its peers and is a prime takeover candidate. Cannabis has been on an amazing run over the past 12 months, and though the sector has pulled back in recent weeks, there’s still a lot of promise in the industry, Hammill asserted, especially in the United States where legislative advances at either the federal or state level could move the needle for cannabis companies operating in the US. “On the federal level, the passage of any of the three bills (MORE, STATES, SAFE) highlighted would be positive for the industry. On the state level, we have highlighted several states where we believe legalization or expansion of medical/adult-use cannabis sales is imminent. The shift from medical to adult-use is material to sales, we estimate the lift in sales at 3-4x when states legalize adult-use,” Hammill wrote. One of Hammill’s favourites in the US is Florida-based medical cannabis company Cansortium, which along with the vertically integrated operations in the Sunshine State has business in Pennsylvania, Michigan and Texas. Cansortium has narrowed its focus over the past year, selling off assets in Puerto Rico and Canada and turning its eye to strengthening its business in the still-growing Florida medical market where the company has 24 dispensaries under its Fluent brand. “Management recently announced the company has surpassed Florida guidance for 2020 by $1.9 million, reaching $46.9 million in sales,” Hammill wrote. “Its new 26,000-square-foot facility is up and running and we should see its initial products in March. There are further plans to expand the facility to 40,000 square feet by June.” “In Pennsylvania, TIUM is in the process of pursuing its option to open two more dispensaries, in addition to the single dispensary it currently operates. In Michigan, it is contemplating whether to use its license to open its own dispensaries or continue to operate exclusively as a cultivator and wholesale distributor,” he wrote. Hammill said TIUM’s recently transformed management team has put in the work to improve the company’s balance sheet and pointed as evidence to the recent agreement to extend the maturity of its convertible notes to December 1, 2022 (exercisable at C$0.60). (All figures in US dollars except where noted otherwise.) Hammill also noted that Cansortium is the only publicly-traded multi-state operator with a cannabis license in Texas, the second-largest state in the Union by population, which the analyst called “one of the largest untapped markets in the US, drawing many comparisons to Florida in the mid-2010s.” By the numbers, Cansortium last reported its financials in late November where its third quarter 2020 featured consolidated revenue up 94 per cent to $14.3 million and consolidated adjusted EBITDA of $3.6 million, up from a loss of $8.1 million a year earlier. Looking ahead at the Q4 and full year, management has guided for 2020 revenue of $55-$60 million and adjusted EBITDA of about $14 million. For his part, Hammill is calling for 2020 revenue and EBITDA of $55.4 million and $14.6 million, respectively. TIUM said in the November Q3 press release that it expects to expand its cultivation and production in Florida over 2021 and 2022 while growing it retail footprint to an anticipated 33 dispensaries by the end of 2022. In Pennsylvania, the company expects to open two more dispensaries (for a total of three) over the first half of 2021, while in Michigan is “pursuing expansion opportunities” and in Texas its will expand its current cultivation facility by up to 400,000 additional sq ft “as demand requires.” Management projected 2021 revenue and EBITDA at $95-$100 million and $30-$35 million, respectively, and 2022 revenue and EBITDA at $140-$145 million and $60-$65 million, respectively. Hammill is forecasting at the low end of that guidance and is calling for 2021 revenue and EBITDA of $94.1 million and $26.8 million, respectively, and 2022 revenue and EBITDA of $144.0 million and $58.4 million, respectively. Hammill said while putting a valuation on cannabis names has been a tricky prospect in the past, there’s overall less volatility and more room now for a uniform valuation methodology as the industry has matured. For TIUM, Hammill has reasserted his “Buy” rating with the raised target of C$2.50 (previously C$1.25), which at the time of publication represented a projected one-year return of 242 per cent. “We believe TIUM’s business is significantly undervalued and could easily be a takeout target for a larger player looking to expand its Florida footprint while picking up exposure to the untapped Texas market,” Hammill wrote.