NoSpoon wrote: My two cents:
From MD&A for Q1, 2017 released Aug 28, 2016
| | Current Capacity | Future Capacity |
| Tweed | 3,540 kg | 11,000 kg |
| Tweed Farms | 1,200 kg | 15,000 kg |
| Bedrocan | 2,000 kg | 4,000 kg |
| Summation: | 6,740 kg | 30,000 kg |
Given the recent activity, it is reasonable to assume that they are rapidly approaching the future capacity. With Rec, they will have no choice but to run full out, ie be outputting 30,000 kgs or more (multilayer growing will improve the future capacity so they probably will exceed 30,000 kgs).
Okay, so assuming CGC is outputting 30,000 kgs per year, let’s further assume that the average price is $7/g. This will result in $210,000,000 in sales. Again, another assumption, this time assume 30% net profit, and you get $63,000,000 net. Now, assuming a P/E of 20, we get a valuation of $1,260,000,000. Divide this number by 114,000,00 of outstanding shares and we get $11.05.
This is a new industry and a P/E of 20 is rather low. If you put in 35, SP goes to $19.34.
Arguments:
Is $7/g reasonable? I think this is actually low. Bedrocan was selling at $5/g but recently upped the price. The higher end product like Snoop’s Leaf will sell at a premium. Consumables will sell at a premium. Competition will push the number downwards but as it stands, everyone is unable to meet current medical demand – as evidenced by the low inventories in the stores.
Is 30% net profit reasonable? Not sure. CGC hasn’t been profitable so this is a wild guess.
What is a realistic P/E? The market will decide. Historically, a healthy P/E is between 15-20. I might be wrong on this so if anyone has a better number, throw it out there.
Will there be only 114 million shares? M&A activity and Equity financing will bring this number higher.
The numbers from their Q2, 2017, due Nov 14 will provide greater clarity. I got Nov 14 from the Sedar filing dates, part of which is show below.
| Year End | | AFS | Q1 | Q2 | Q3 |
| March Y/E | Period Ending | March 31, 2016 | June 30, 2016 | September 30, 2016 | December 31, 2016 | |
| | Non Venture | June 29, 2016 | August 15, 2016 | November 14, 2016 | February 14, 2017 | |
| | Venture | July 29, 2016 | August 29, 2016 | November 29, 2016 | March 1, 2017 | |
Since CGC moved to the TSX, they become non-venture and their filing date has moved forward from Nov 29 to Nov 14.
Nov 14, in my mind, is a more important date that Nov 30, when the report is filed. The report details won’t be available for months after that and who knows what their recommendations will be. But Nov 14, we get more numbers and a better insight into the healthiness of CGC.
Take all this with a grain of salt. It is extrapolating forwards from a few set of numbers. A lot of assumptions are made and none of them will probably bear out. But we have to start somewhere. I think going the capacity route is good.
So is CGC overpriced at $5.48?
I don’t think so. But you decide.