RE:Why are we back to .19 cents Stock price is frustrating.
For the company part of the equation though, I am really pleased with the changes that have been made and realizing it takes up to a year for those kind of seismic changes to really take hold on changing the investor mindset and elevating companies to a new reality.
The early beginnings of Canada House, involved some awesome soldiers, who began by creating MFT.
Now with the company heading into both legalized cannabis and licensed sales was a great time to upload skilled corporate management. The resumes of the new board and executive line up look outstanding but investors will need time to see how the new team executes beyond the resume.
Past financial worries were addressed by last falls convertible debentures and warrant reciepts that have been ongoing, leading to a balance sheet that suggests, no new financing is imminent with the current business plan. January the cash on hand was over 10 million. The cash burn is not that large with the facility complete for now, clinics reorganized and approaching cash flow, and the oils production costs to be carried by the JV with EAT. Warrants that are still out there, represent more future funding too. Some convertible debentures have been converted into shares each month and reducing the debt load.
Overall for the market, summer is deflating for cannabis stocks and others, but volumes are expected sector wide to begin a push again coming into September and will provide a more receptive time for share price gains for those looking for immediate gains.
I was an early investor in Cronos, (then Pharmacan) and at the time it was some 28 cents and had a bad reputation and not attractive to investors. The change in management there to Mike Gorenstein, began over time to regain interest and show with good execution and thoughtful planning, even a dog could find investors good graces. One friend of mine was owning shares from 14 cents and hit a hundred bagger when Cronos peaked near 14 bucks. I see that as a possibility here at Canada House. A very similar story if the new mangement for Canada House executes on communication, future growth, and expansion.
The risks are mostly behind investors now with todays share price a solid floor for protection to the downside, while the upside is incredible. When fundamentals begin to guide stock prices and at full production, clinics at break even or better, and Knalysis finding some traction, there is a chance for a decent earnings per share.
Lets look at production. 2700 kgs of cannabis when licensed at current size could see Canada House with ebitda of $1-2 per gram sold when systems are optimized. Maybe more but conservative modeling is more my own style.
At 2 dollars per gram the earnings would be 5.4 million at full production. Then add in pure ebitda from oil productions and sell via JV with EAT. Oil sales are expected to be a large part of any LPs sales % and the cost of facility and equipment is EATS not Canada House, so the profit is pure but had to estimate at this time. Same for Knalysis.
So lets stick to the 5.4 million earnings/ 170 million share = 3.1 cents per share not including any earnings from oils, knalysis or clinics. Low ball estimate I would say.
At 3.1 EPS and a multiple of 20 the share price would equate to 62 cents. The multiple of EPS that is attributed to LPs is varied and Canada House currently will not have a huge EPS because its not an industry darling. That could change too and EPS is much higher overall in this speculative market, but again, low balling the modeling is better for risk management reasons.
So thats just a quick peek at what I expect but my hopes are for far more. I love the management, I note they added a board member from a media background and expect we are on the cusp of a better interface between investors and the company management.
Dean