Westleaf Inc. WSLFF

Westleaf is a Canadian cannabis company focused on cannabis brands, extraction and production of derivatives, wholly owned retail, as well as cannabis cultivation. The Company’s extraction and processing facility, The Plant, will produce high quality and consistent cannabis derivatives and consumables, both for Westleaf’s in-house brands as well as white label products. Westleaf’s retail concept, Prairie Records, leverages the instinctual tie between recreational cannabis and music.

GREY:WSLFF - Post by User

Westleaf Inc. > Eight Capital: Buy rating and $0.70 target for Westleaf Inc.

<< Previous

Bullboard Posts

Next >>

Comment by Walshybxon Jan 09, 2020 10:10am

133 Views

Post# 30534171

RE:Eight Capital: Buy rating and $0.70 target for Westleaf Inc.

thanks for this. Westleaf showing they are focused on the consumer. Stock is very cheap right now and will run hard fast when sentiment changes.

cbcguy101 wrote: According to Eight Capital:

https://research.viiicapital.com/Reports/Research/2020/January/WL010920.pdf

January 9, 2020

Westleaf Inc.

(WL-TSXV: C$0.17)

Rating: BUY

Target: C$0.70 (from C$1.10)

Westleaf acquires We Grow BC

We are reducing our target price on Westleaf to C$0.70 per share (from C$1.10) following a reduction to our revenue estimates following a shift in the company's strategy to now operate fewer flagship retail locations. This is partially offset by higher cultivation volumes with the addition of We Grow. We also reduced our estimated pricing for dried and processed cannabis to reflect accelerated commoditization of wholesale cannabis and increased industry extraction capacity, partially offset by higher prices commanded by Qwest's premium products.

Westleaf completed the proposed merger with We Grow BC Ltd., a Crestonbased indoor cultivator of premium cannabis, on December 23, 2019. We Grow's Qwest brand is recognized for its premium quality products evidenced by its industry-leading retail prices.

We Grow reported net revenues of $2.7 MM and adjusted EBITDA of $0.8 MM in the third quarter.

Strategic rationale:

• Increased production capacity. Combination of We Grow's current production facility and Westleaf's Thunderchild facility creates one of the largest craft producers in Canada, with a focus on carving out a luxury segment that currently does not exist. The combined entity is expected to bring the forecasted 2020 production capacity to 9,100 kg of dried cannabis flower. We note that Qwest's products have a price point of around $17 - $20 per gram.

• Access to additional debt capital. As part of the transaction, ATB Financial has committed to provide $8.9 MM of additional credit and liquidity through a new term loan ($4.7 MM) and removal of a $4.2 MM restricted cash requirement. With the transaction closed, the combined company's remaining infrastructure projects are expected to be fully funded.

• Established brand, premium pricing. Qwest premium brand allows the company to command industry-leading dried cannabis prices with Qwest products retailing for $20.00 per gram and $16.57 per gram, as compared with the industry average of $11.55 per gram.

Valuation. Our BUY rating and $0.70 target price is based on an unchanged multiple of 5.0x our FY2021E EBITDA of $50.4 MM and implies a 312% return to the current share price.