Weekly Cannabis Commentary

Author: Sid Rajeev, Iftekhar Mahmud

Cannabis Industry Performance

Cannabis industry MCAN and XCAN was launched on November 18, 2019 and January 20, 2020, respectively

Source: TMX Money, FRC

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.

Average EV/R (October 2019 – November 2020)

Source: S&P Capital IQ, FRC

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

Source: Online Provincial Cannabis Stores, FRC

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.

Source: Online Provincial Cannabis Stores, FRC

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.

Nationwide Store Count as per Nov. 23, 2020

Source: Provincial Websites, FRC

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.

Chart representing the number of stores across the country has increased by 63%

Source: Provincial Websites, FRC

The following shows the number of retail cannabis stores by province/territory:

Source: Provincial Websites, FRC