Weekly Cannabis Commentary

Author: Sid Rajeev

Cannabis Industry Performance

Cannabis Industry Performance

Source: FRC

Following the acquisitions announced earlier this year, of Zenabis Global Inc. (TSX: ZENA) for $235M, and 48North for $50M, HEXO Corp (TSX: HEXO) announced plans (last week) to acquire Redecan (Canada’s largest privately-owned licensed producer, operational since 2014) for $925M ($400M in cash and $525M in common shares). If approved by shareholders, this deal will make HEXO the largest company by market share in Canada, overtaking Tilray-Aphria (TSX: TLRY).

Valuation
As of May 28, 2021, the Canadian big four LPs were trading at a 150% premium (up from 122% in previous week) over their U.S. peers. We believe the HEXO acquisition news directly impacted the premium gap.

The Canadian big four LP

Source: S&P Capital IQ, FRC

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

Average EV/R (October 2019 – May 2021)

Source: S&P Capital IQ, FRC

Canadian Retail Cannabis Pricing

Source: Online Provincial Cannabis Stores, FRC

The average retail price per gram declined week-over-week from $11.27 to $11.26. 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 31, 2021, there are 2,103 retail cannabis stores, a week-over-week increase of 59 stores across Canada. New stores opened in the past week were in Ontario (20), Alberta (13), B.C. (12), Saskatchewan (11), and Manitoba (3).

Nationwide Store Count

Source: Provincial Websites, FRC

Source: Provincial Websites, FRC

Weekly Psychedelic Commentary

Psychedelic Industry Performance

Psychedelic Industry Performance

Source: TMX Money, FRC

Over the past week, PSYK stayed flat.

Weekly Cannabis Commentary:

Source: https://www.researchfrc.com/weekly-cannabis-commentary-86