Mackie Research Rating Target Price $3 Touting a distinct business structure and leverage for growth in both the recreational and medical marijuana industry, Mackie Research analyst Greg McLeish initiated coverage of Cannabis Wheaton Income Corp. (CBW-X) with a “buy” rating.
″CBW’s unique model is made up of three distinct verticals – upstream, midstream and downstream,” he said. “This platform provides early stage LPs and late stage LP applicants with non-dilutive financial capital and ongoing regulatory support, in exchange for receiving a minority equity interest, as well as the rights to a negotiated offtake of the cannabis produced. This model allows its partners to access the necessary capital in order to expedite their time to market, and creates long-term value for both the company and its industry partne
Mr. McLeish said Toronto-based Cannabis Wheaton, formerly Knightswood Financial Corp, currently possess a “strong” financial position with cash and equivalents of approximately $200-million. He said that strength will allow it to deploy $100-$150 million towards streaming projects as well as potential working capital requirements.
“The CBW model allows it to access cannabis production from a growing collection of diverse partners, thus enhancing its position to participate in anticipated provincial distribution channels,” he said. “Through existing agreements, the company has locked up more than 100,000 kilograms of funded production, positioning it as one of the leading suppliers for both medical and recreational cannabis markets.”
“CBW’s management believes it is important to create value to the base commodity: A natural evolution for this is a move into cannabis oils and other concentrates. The company had been exploring opportunities for large scale extraction and distillation, formulation and product development. On April 4, 2018, it entered a definitive acquisition agreement for all outstanding shares of Dosecann Inc., another key component of CBW’s vertical integration strategy. The acquisition will allow the company to expedite its move into cannabis oils, and positions it well for the cannabis derivative products market once available (including pharmaceuticals, nutraceuticals, and consumer packaged goods). The company’s ability to add value to the cannabis it offtakes from its partners should enable it to protect and enhance returns.”
He set a target price for its shares of $3.