CannTrust Holdings Inc CNTTQ

Beacon Report: TRST catalysts

[trickydisco]

Exhibit 7. Key Stats For The “Big Five” LPs

(MM) LRQ

CannTrust Holdings Inc. (TRST-C, not covered) – Uplisting To The TSX

Primary Catalyst

• We consider CannTrust to be one of the “Big Five” LPs in terms of current operations – particularly revenue and EBITDA, with clear growth ahead from recent expansions.

• That said, the company’s EV is significantly less than the other members of the “Big Five”. As shown in Exhibit 7 below, CannTrust recognized $6.1MM of revenue last quarter, which is as much as Aphria’s last quarter. CannTrust also reported $1.2MM in EBITDA, which was well above MedReleaf’s last quarter and just shy of Aphria’s, yet its EV is only about one-third the size of these two companies. At 35% CannTrust’s top line posted much faster sequential growth in revenue than any of the “Big Five” except Aurora Cannabis Inc. (ACB-T, not covered – RESTRICTED), and commentary from management suggests a further 12+% sequential growth ahead to $~7MM in Q4/FY17.

• We believe the main reason CannTrust trades at a discount to these peers is that due to licensing agreements in six U.S. states for its proprietary BrewBudz line of cannabis infused pods for Tassimo, Keurig and Nespresso machines, CannTrust trades on the CSE while the other four companies trade on the TSX. We believe management acknowledges that it may be leaving hundreds of millions in market cap on the table by being on the CSE – and will look to remedy that by divesting of its agreements in the U.S. and uplisting on the TSX in the near-term.

• We would expect CannTrust’s shares to react immediately in the event it makes such an announcement – and then climb further once it switched exchanges. For a precedent, we highlight the chart of Namaste Technologies Inc. (N-C, not covered) since mid-November when it announced that it was divesting of its U.S. assets.

  Secondary Catalysts

• We believe CannTrust is likely to receive a supply contract with the LCBO – which would also be a major catalyst for the company’s shares.

• Winning The RFP To Cultivate Cannabis In Germany. 
  
  • We would not be surprised to see more international activity from CannTrust – particularly given its partnership with Apotex, a privately- held pharmaceutical company which operates in over 45 countries and exports to over 115 countries. We believe Apotex can help open doors for CannTrust in terms of exports – as well as provide assistance on getting new forms of drug delivery up and running. 

  
  Entire report here -->  https://www.theglobeandmail.com/globe-investor/investment-ideas/research-reports/article37523423.ece/BINARY/Beacon-pot-Jan-8.pdf