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Weekly Cannabis Commentary

Weekly Cannabis Commentary

As of February 22, 2021, there are 1,601 retail cannabis stores, a week-over-week increase of 44 stores across Canada, of which, Ontario had 22. As we noted before, we continue to see Ontario’s store growth significantly outpace other provinces due to the recent mandate of the Alcohol and Gaming Commission of Ontario (AGCO) to increase retail store authorizations.

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Weekly Cannabis Commentary

Over the past week, the Horizons Marijuana Life Sciences ETF (TSX: HMMJ / “HMMJ”), the Standard & Poor’s/MX International Cannabis Index (“MCAN”), and the Standard & Poor’s/TSX Cannabis Index (“XCAN”) generated returns of 5%, 1%, and 6%, respectively. Notably, Canopy (TSX: WEED) was up 21% over the past week. We believe the run up was due to the launch of Martha Stewart’s CBD product line for pets. This product line, manufactured by Canopy, claims to help dogs reduce stress and keep their joints healthy. We note that pet adoption has increased during the pandemic, based on data from various sources. Canopy will release its Q3-FY2021 financials on February 9, 2021.

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Weekly Cannabis Commentary

Canadian Retail Cannabis Stores: As of January 4, 2021, there are 1,421 retail cannabis stores, a week-over-week increase of 37 stores across Canada; all new stores came from B.C. We note that, due to the holidays, store count data was not updated on most provincial websites. We expect to get a more precise update next week.

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Weekly Cannabis Commentary

On December 11, 2020, Health Canada opened a 30-day public opinion forum to get inputs for the Cannabis Act. We expect rules of packaging and advertisement to be among the key issues that would be considered for review. In 2021, with more U.S. states legalizing cannabis, and an increasing number of European countries opening up medical cannabis use, we anticipate M&A activities to increase as larger companies try to gain market share amid a rapidly changing industry landscape. We note that Aphria’s proposed acquisition of Tilray is at an EV/R multiple of 10x vs the sector median of 7x. Our top picks list includes two cannabis companies – Inner Spirit Holdings (CSE: ISH) and Delta 9 Cannabis (TSX: DN) – they are trading at just 2.5x and 1.7x, respectively.

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