Weekly Cannabis Commentary
Author: Sid Rajeev, Iftekhar Mahmud
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 returns of 18%, 13%, and 16%, respectively. The market continues to trend upwards with growing optimism for federal legalization of marijuana in the U.S., following the Democrat win in the Senate. Last week, Aphria (TSX: APHA), reported a record $120M sales in its Q2-FY2021 (ended, November 30, 2020), which reaffirmed the increasing sales trend of the Canadian cannabis industry.
Valuation of Select Canadian LPs
The following chart shows the average Enterprise Value to Revenue (“EV/R”) ratio of the Canadian cannabis companies we track.
The average EV/R, as of January 15, 2021, was 23.5x – a WoW increase from 18.2x. The average EV/R, from October 7, 2019 to January 15, 2021, was 12.2x.
Canadian Retail Cannabis Pricing
The average retail price per gram remained the same week-over-week at $11.01. The below chart shows Canadian retail dried cannabis flower pricing since we initiated price coverage.
Canadian Retail Dried Cannabis Flower Pricing
Canadian Retail Cannabis Stores
As of January 18, 2021, there are 1,454 retail cannabis stores, a week-over-week increase of 20 stores across Canada, of which, Ontario had 18, and Alberta had two. As we noted before, we expect Ontario’s store growth to significantly outpace other provinces as a result of the recent mandate of the Alcohol and Gaming Commission of Ontario (AGCO) to increase retail store authorizations.