Summary from the Globe & Mail:
Pointing to its “industry leading” operating metrics and expanding portfolio of brand partners, Industrial Alliance Securities analyst Nav Malik initiated coverage of Flower One Holdings Inc. (FONE-CN) with a “buy” rating on Monday.
Mr. Malik said the Toronto-based company is well-positioned to be Nevada’s “pre-eminent” cannabis supplier with its flagship 400,000 square foot greenhouse and 55,000 square foot production facility.
"Flower One has reported impressive operating metrics to date, with an average yield of 38.3 grams per sf per harvest (or 230 grams per sf annually) at a cash cost of 45 cents per gram," he said. "These are industry leading metrics as we estimate yields for Canadian cannabis licensed producers (LPS) are 100 to 150 grams per sf, while costs even for 'low-cost' LPs are in the $1.00-1.50 per gram range."
"Flower One’s core strategy is to partner with top performing brands seeking to enter the Nevada market. The Company handles the entire production and distribution process, manufacturing finished packaged products that are supplied to Nevada’s dispensaries and delivery services. Flower One currently has a portfolio of 11 brand partners and will continue to expand its portfolio going forward."
The analyst said Flower One is now focused on both market penetration and revenue growth through the introduction of new brands under its partnership agreements, as well as through bulk wholesale flower and distillate sales. He's projecting revenue of $82-million in 2020 and $168-million in 2021, as well as EBITDA margins of 50 per cent.
He set a target price for the company’s shares of $4.50, which falls below the current consensus on the Street of $5.17.
“Flower One shares initially traded around $1.50 following its RTO in October 2018. The shares traded higher through April 2019, reaching approximately $3.50, as the Company made a number of positive announcements regarding new licensing and brand partnership agreements. Since April 2019, FONE shares have trended lower (currently below $2.00), despite the Company continuing to make steady progress with new licensing agreements and the completion of the NLV Greenhouse. We believe Flower One shares represent an attractive buying opportunity at current levels now that the conversion of the flagship greenhouse is complete and the Company focuses on increasing its penetration of the Nevada market.,” said Mr. Malik.
Disclosure: I am/we are long FLOOF.