Seems like a good bargain at this price so just initiated a position. GLTA
Verano Holdings Corp. secured the “building blocks of [its] Pennsylvania fortress” with the $207-million acquisition of two cultivation/processing and six retail dispensary licenses, according to Echelon Partners analyst Andrew Semple.
“This strategically deepens Verano’s operations in a key, sizable limited license market, while allowing Verano to become vertically integrated,” he said. “[Previously], we specifically called out that a Pennsylvania cultivation/processing license would be an “excellent fit” for Verano’s business, and so we are very pleased to see this announcement.”
Mr. Semple said the deals are likely to prove “highly” accretive for the Chicago-based multi-state cannabis operator.
“These acquisitions provide Verano with one of the largest license portfolios in the state of Pennsylvania,” he added. “he Company will hold 2 cultivation/processing licenses and licensing for 18 dispensaries upon closing of all pending M&A in the state. In a robust limited license market such as Pennsylvania, this sizeable license portfolio allows for Verano to build defensible market share, anchored by some of the best performing stores in the market and backed by a quality brand portfolio and high-quality production operations.
“On the upstream production side, we believe much of the existing capacity from the 62,000 SFT cultivation facility will be earmarked for the Company’s operating dispensaries, allowing Verano to be vertically integrated. We expect the remaining capacity will support the introduction of Verano’s branded products to the PA wholesale market. Growth in production capacity will largely come from the second cultivation/processing facility license that is currently undeveloped. We expect this facility to come online by Q222, or roughly one year from today. The Company has not yet confirmed the potential size of this facility or the capex required for its buildout, though we assume $30-million twelve-month capex budget in our model. We believe Verano is funded for this buildout.”
Seeing further “have attractive and accretive M&A opportunities in its pipeline,” Mr. Semple, keeping a “buy” recommendation, raised his target for Verano shares to $38 from $35. The average on the Street is $39.60.
Verano, which began trading on the Canadian Securities Exchange on Feb. 17, closed at $22 on Thursday.