Emblem Corp EMMBF

RE:RE:RE:RE:Adjustments are necessary...

[cressco]

deminimis wrote:

So full disclaimer, like anybody trying to project this far out this is really just a shot in the dark but this is what I am forecasting for 2021:

 

KGs sold: 55,000 (I thought this was conservative based on their projection of 70,000KGs but given recent disclosures I am wondering if I am not being conservative enough. That being said they can supplement their own grow by purchasing elsewhere and after reviewing their inventory and biological assets from the last 3 Q's I am convinced they have already started doing this. I just can't see how they would have got to their current inventory levels with their own grow alone)

 

Average Selling Price: $6,000KG

 

Total Revenue: 330M

 

Net Income: 60M

 

So what kind of multiple do I see once all is said and done? Probably somewhere in the mid to high teens but the bigger question is when will all be said an done? I would suggest that it won't be for quite some time. I think that Emblem will see very high growth for at least the next 5 years if they are limited to the CDN market and could easily be 10 years if international markets really open up.

 

Companies that are in a very high growth phase tend to trade at very high PEs and then correct hard once that growth starts to calm. Some examples:

 

Lululemon traded at a forward PE of 30-50 between 2008-2013 as they were experiencing yoy growth rates between 31-57% and then corrected down to the low 20s in 2014 when their growth rate slowed to around 15% although it did trade in the mid 30s at times in 2015 and 2016. It is currently trading at a forward PE of 23.

 

Shopify doesn't have a PE because it has never made of profit but with yoy growth in the 90s for the past several years and 66% projected for this year it is currently trading at an eye-watering 15.5 forward sales. 

 

Some more modest examples, Colliers International is projecting yoy of 15% growth for the next few years and has been trading at forward PE of 30 before recently pulling back to 25. FirstService has a similar growth profile at is trading at a forward PR of 45.

 

Given this and the growth rate I expect Emblem will be at, I think a forward PE of 35 in 2021 is within reason. So at 60M of earnings that puts us at a mkt cap of about 2.1B. This would give us a SP of about $15 on my projection of 140M outstanding shares though I am starting to get optimistic that we could be at sub 130M which would boost the SP to about $16.

 

Tanx for taking the time...You could very well be right however by 2021 I think we'll see most of LPs approaching if not already at their peak production capacity and therefore a PE north of 35 for me is very optimistic. We might also see a market saturation in both medical as well as rec demand and so it should be a relatively static market, imo. I dont think international expasnion will play a significant role like it does in other markets such as ,retail, tech, etc. The X factors will be on the pharmaceutical side of things, and I think we all agree with that. I do agree with your conservative profit margins of 18-20%, and the production estimate as well.

With regards to your colorado feedback, i see your point howevercannabis black market is very elaborate, and will only get more elaborate and extensive if the government provides it with the opportunity, which they will I believe with high markups that they will need to fund the unionized salaries. This is why I believe LPs whose main focus is rec might not do as well as originally assumed. Time will tell. 
Regards