Emerald Health Therapeutics Inc EMHTF

Valuation

[peewee1]

Saw several posts about EMH valuation; you just need to look at the last monthly report to see the financials. Total shareholder equity on June 30 was $91M, and it looks like these two sales will add a total of $12M to the shareholder equity:

1. The sale of Verdelite will convert a portion of the non-current assets to current assets (cash). No easy way to determine how much Verdelite contributes to the non-current assets normally, but since they recorded an impairment charge for Verdelite on June 30, we know the $21M cash is primarily the value of the asset in the non-current assets. As a result, in terms of assets it will not affect the shareholder equity disclosed on June 30. It will just convert it from non-current to current. Quinto is getting it for a steal; EMH paid $90M for it 2 years ago, not including the costs to bring it into production.
2. The PSF portion of the non-current assets is clearly shown as $68M on June 30. They are selling it for $80M (round numbers), so that will add $12M to the shareholder equity, and convert it from a non-current asset to a current asset.
3. If we take the 17M in current assets on June 30, add 21M for Verdelite, and 80M for PSF we get total current assets of 118M. Non-current assets will drop to approx 36M, for total assets of $154M.
4. Subtract the $50M of current and non-current liabilities leaves $104M shareholder equity, or $.50 per share using P/B ratio of 1. Note that the P/B ratio for VFF is 2.36, APHA is 0.94 (lots of cash), and WEED is 1.6 (lots of cash)

Question now is, what do they do with the cash. Verdelite was a disaster - they paid $90M two years ago, and now offloading it for $21M - $8.5M (they still owe) = $12.5M. That doesn't include the costs they incurred to bring it into production. Note this was all before the current CEO, and the cannabis market is much evolved since 2018, so things have changed. Legalization in the USA is coming, and that should spur investment in this industry again.