Weekly Cannabis Commentary
Author: Sid Rajeev, Iftekhar Mahmud and Lavish Ramrakhani
Cannabis Industry Performance
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 a return of -5%, -4%, and -5%, respectively. There was no significant news in the industry in the past week.
Valuation of Select Canadian LPs
The following chart shows the average Enterprise Value to Revenue (“EV/R”) of the Canadian cannabis companies that we track.
The average EV/R, as of October 26, 2020, is 11.5x – an increase from 10.4x a week ago. Note that EV/R increased WoW, despite the decline in share prices mentioned on the previous page. This is because the EV/R ratios are based on last week’s ending share prices, and the Wow performance is based on Monday’s prices (and today there was a large market correction). The average EV/R, from October 7, 2019 to date, is 11.5x.
The average retail price per gram increased $0.04 week-over-week to $11.02. Retail cannabis dried flower prices (shown below) also increased this past week, by $0.06, the biggest YoY price increase for the year. We will closely monitor prices in the coming weeks to see if there is a change in trend.
Canadian Retail Cannabis Stores
As of October 26, 2020, there are 1,200 retail cannabis stores, a week-over-week increase of 10 stores across Canada, including seven in Ontario and three in Alberta.
The following shows the number of retail cannabis stores by province/territory: