TSXV:KHRN.H - Post by User
Post by
Mountainbikeron Apr 25, 2019 3:43pm
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Post# 29671252
U turn
U turn
Potential catalysts. When the company reports Q4/18 earnings on April 30 updates regarding the following potential catalysts may be provided.
· Global expansion. Khiron intends to be a leader in Latin America and has highlighted Brazil and Mexico as major focus areas. We note that the passing of comprehensive cannabis legislation in Mexico is widely expected by October 2019, which we view as a major catalyst for the stock. The company also plans to finalize its acquisition of Uruguay-based NettaGrowth and has positioned itself for an entry into the US by commercializing Kuida through its Dixie Brands JV.
· Operating developments. In Q2/19, we are expecting final genetics registration, the receipt of a commercial THC quota and the start of commercial cannabis sales through ILANS and select pharmacies. We are also expecting an update on Kuida sales, where we current forecast Q4 revenues of $225,000. Longer term, the company is focused on obtaining cannabis insurance coverage, expanding its clinic operations and obtaining new product approvals (including potential pet products).
Valuation. Using a sum-of-the-parts DCF model (10-14% discount rate), we estimate a value of ~$6.50/sh, which reflects a target EV of ~$630 million. Our valuation is based on funded capacity and includes long-term volumes of 100,000 kg/year, 400,000 active patients and a 5% market share in applicable LATAM CBD markets. Based on our estimates, Khiron is trading at a 2021E EV/EBITDA multiple of 4.0x, versus our target multiple of 9.0x.