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 21%, 21%, and 20%, respectively. Aphria (“APHA”) and Tilray (“TLRY”) both had notable returns, as they announced their plans to expand in Europe (Germany, Portugal, and Spain). We also believe that rising optimism for federal legalization in the U.S. was a factor for the price run-up.
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 February 5, 2021, was 27.8x – a WoW increase from 23.0x. The average EV/R, from October 7, 2019, to February 5, 2021, was 12.7x.
The average retail price per gram increased week-over-week from $11.28 to $11.29. The below chart shows Canadian retail dried cannabis flower pricing since we initiated price coverage.
Canadian Retail Cannabis Stores
As of February 8, 2021, there are 1,547 retail cannabis stores, a week-over-week increase of 25 stores across Canada, including 17 in ON, five in AB, and three in B.C. 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.