Looking forward to 2023Setting aside any action on cannibis on legislative front, here are my views on what we can look forward to as we head towards 2023.
1) The company has completed the expansion of the new grow facilities (i.e. organic growth initiative) and the retrofits to the existing facilities to improve efficiency (i.e. lighting). The new grow capacity is equivalent to 8,000 pounds of flower. Each pound sold externally is worth USD1,500. For the new lights, they will be increasing yields by 20%. Overall this translates into more revenue or improved margins. Thus I expect the financial results will improve in the coming quarters.
2) The company still owes Sonny USD4.6 million. This amount will be paid off by early 2023. This means that CXXI will be debt free soon which translates into increased flexibility to borrow a significant amount of funds to finance any strategic acquisitions that might come up.
3) The company currently spins off over USD8 million dollars in free cash flow annually. With Sonny paid off soon and if no acquisitions are made then what can the company do with this money? Well I would say they should start an ongoing share buyback programme of CXXI shares. Trailing EPS from ongoing operations is USD11 cents which means that the company is trading at less than 3X trailing earnings. CXXI is a bargain acquisition. My recommendation is the company buyback loads of shares as soon as Sonny's debt is paid off. Wouldn't this be a massive positive feedback loop.
Still long and strong.