Weekly Cannabis Commentary
Author: Sid Rajeev, Iftekhar Mahmud
Cannabis Industry Performance
Note: MCAN and XCAN was launched on November 18, 2019 and January 20, 2020, respectively.
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 2%, 4%, and 4%, respectively.
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 November 23, 2020, is 13.5x – a decrease from 13.7x a week ago. The average EV/R, from October 7, 2019 to date, is 11.59x.
Canadian Retail Cannabis Pricing
The average retail price per gram increased $0.04 week-over-week to $11.03. The below chart shows Canadian retail dried cannabis flower pricing since we began price coverage.
Canadian Retail Cannabis Stores
As of November 23, 2020, there are 1,281 retail cannabis stores, a week-over-week increase of 20 stores across Canada, including eight in Manitoba, five in Nova Scotia, one in Newfoundland, six in Saskatchewan, and one in B.C., offset by a store which closed in Alberta.
The number of stores across the country has increased by 63% since February to date. Ontario has experienced the highest growth (597%). The growth in Ontario is driven by the Alcohol and Gaming Commission of Ontario’s (AGCO) mandate to increase store count in the province, which has a significantly higher population per store vs the national average (see table on the next page). We note that the population to Beer-Wine-Liquor stores ratio across Canada is 10,821 in 2019. As the current population per cannabis store is 30k, we believe there is significant room for expansion of cannabis retail space in the country.
The following shows the number of retail cannabis stores by province/territory: