Weekly Cannabis Commentary

Author: Sid Rajeev, Iftekhar Mahmud

Cannabis Industry Performance

Last week, Aurora Cannabis Inc. (TSX: ACB) released its Q3 (three months ended March 31, 2021) results, with $55M in revenue, down 25% YoY, and $165M (EPS: – $0.85) in net losses, 18% higher loss YoY. Management cited lower demand from provincial distributors and retail channels as the reason for the revenue decline.

Today, HEXO Corp. (TSX: HEXO) announced its plans to acquire 48North Cannabis Corp. (TSXV: NRTH) in an all-share deal valued at approximately $50M. The implied EV/R acquisition multiple is 3x vs the sector average of 14x. HEXO was also able to acquire Zenabis (TSX: ZENA), earlier this year, for just 2.6x EV/R.

In the U.S., Curaleaf Holdings, Inc. (OTCQX: CURLF) announced an agreement to acquire Los Sueños Farms (a private outdoor grow company in Colorado) for US$67M. We were unable to get any information on the target’s revenue/earnings.

Valuation
As of May 14, 2021, the Canadian big four LPs are trading at a 109% premium (up from 94% the previous week) over their U.S. peers. We were expecting the premium to decline due to Aurora’s poor results. We would not be surprised if premiums decline this week.

Source: S&P Capital IQ, FRC

The following chart shows the average EV/R of the companies we track in both sectors:

Canadian Retail Cannabis Pricing

Source: Online Provincial Cannabis Stores, FRC

The average retail price per gram decreased week-over-week, from $11.28 to $11.27. The chart below shows the Canadian retail dried cannabis flower pricing trend:

Canadian Retail Dried Cannabis Flower Pricing

Source: Online Provincial Cannabis Stores, FRC

Canadian Retail Cannabis Stores

As of May 17, 2021, there are 1,995 retail cannabis stores, a week-over-week increase of 13 stores across Canada, with 11 in Ontario, and two in B.C.

Source: Provincial Websites, FRC

Weekly Psychedelic Commentary

Psychedelic Industry Performance

Psychedelic Industry Performance

Source: TMX Money, FRC

Weekly Cannabis Commentary:

Source: https://www.researchfrc.com/weekly-cannabis-commentary-84/