Hi folks,
First and foremost, I have a position in Aleafia and want to disclose this, as there could be bias. Though I try my best to keep everything factual. Please, if you see any major discrepancies or numbers that can be adjusted. Kindly comment and I will make adjustments. This data was hard to collect as a few of these companies are far from transparent when it comes to their capacity, facilities, and kilograms of output. Regardless, I was able to piece some things together to provide some insight into a deep value play.
The stockprice is as of Friday Oct 8, 2021. Please note this post is not a solicitation to purchase or sell any of the listed investments. Always conduct a financial professional when making any major financial decisions. I am not affiliated with these companies so this is merely opinion. I cannot guarantee complete accuracy.
| NAME | AN KG OUT APROX | POTEN OUT KG | SQ/FT CAPIBI | FREE CASH FLO +/- PER QTR | | FREE CASH FLO LAST FOUR QTR | STOCK SYM | STOCK PRICE |
| Canopy | 150k | 653.1k | 5.2 Mil | -202.8k | Q1 2020 | -829.5K | WEED | $16.46 |
| | | | | -313.1k | Q2 2020 | | | |
| | | | | -127.3k | Q3 2020 | | | |
| | | | | -186.3k | Q4 2021 | | | |
| | | | | | | | | |
| Aurora | 142.5k | 700.6k | 5.6 Mil | -73.4k | Q4 2020 | -254k | ACB | $8.99 |
| | | | | -59.5k | Q1 2020 | | | |
| | | | | -65.7k | Q2 2020 | | | |
| | | | | -55.4k | Q3 2021 | | | |
| | | | | | | | | |
| Organigram | 150k | 250.5k | 2 Mil | -15.3k | Q4 2020 | -42.5k | OGI | $2.81 |
| | | | | -2.49k | Q1 2020 | | | |
| | | | | -8.91k | Q2 2021 | | | |
| | | | | -15.83k | Q3 2021 | | | |
| | | | | | | | | |
| Aleafia Health | 127k | 492k | 3.9 Mil | -10.4k | Q3 2020 | -38.4 | AH | $0.29 |
| | | | | -10k | Q4 2020 | | | |
| | | | | -7k | Q1 2021 | | | |
| | | | | -10.8k | Q2 2021 | | | |
So what does this all mean? First AN KG OUT APROX is me approximating what the company is currently outputting annually for Kilograms of flower. POTEN OUT KG is me completely guessing what the potential max output is for KG when these companies use their full square footage to grow. I was able to ascertain lots of data from various websites and news articles. Once I sort of got a feel for how much square footage could produce for one company I just used that ratios for other to approximate. SQ/FT CAPIBI is what the companies have in square footage. I tried to be as accurate as possible. Some companies list all of their facilities and footage alongside being very transparent, while others like WEED really try and not let you know.
FREE CASH FLO +/- PER QTR is where things get really important. We need to know if a company is making money from their actual business operations. What does this mean? Business operations are the companies main day to day activity that generates cash flow/income and in some cases profit. This being said when you look at the financial statements of these companies they always include things like the sale of buildings, or other items that are not their primary source of income. These have to be stripped out of the statements to see the companies true cash flow and are they really profitable or not. I am going to provide one example as I need to be very clear on how important this is.
EXAMPLE (ASSUME END OF YEAR STATEMENT): A pizza company shows $100,000 positive cash flow. However, they only sold $50,000 worth of pizza and had $60,000 in overhead expense. It was a bad year due to COVID. How in the hell are they showing positive cash flow of $100,000? When their day to day operations are failing financially. Well they sold one of their ovens for $110,000. So instead of their cash flow showing -$10,000 it shows $100,000. This provides a very unclear image of how the business is actually performing. This is exactly what happens with these cultivators above. So I went and stripped some items out of their cash flow and added some items back.
HOW WAS ALEAFIAS CASHFLOW DERIVED ABOVE AND THE REASONING?
Added back - increase or decrease in marketable securities - WHY: Because if the value of marketable securities the company holds (this is other stocks not their own) goes up or down this will increase or decrease available cash flow
Added back - Debt, lease, and dividend servicing payments - WHY: This is simple the company obviously had some cash in order to make these payments. That cash had to come from their business earnings.
Added back - Atypical uses of cash - WHY: The company again had cash from their business and used it for some unregular purchases.
Subtracted - Proceeds from new debt, leases, and shares issued - WHY: Because these proceeds are not real business operations income. If the company is constantly cash flow negative they will have to continue to secure new debt or issue more shares. I need to see what their cash flow is without them adding in proceeds from this type of stuff. I hope this really makes sense as it is so key in what I am illuminating above.
Subtracted - A typical sources of cash - WHY: Again this was cash received from atypical sources in other words not their day to day business of selling flower, CBD, or derivatives from these sources like gummies and oil.
WHAT DOES IT ALL MEAN?
When I look at the above I see that Aleafia is actually the closest of all the companies to maybe turning a profit in the coming quarters. All these big well known names that every financial advisor touts are still losing a lot of money. Aleafia is very cost control conscience and if they can pull things together I think this puppy has a lot of room to match Organigrams stock price and creep up on Aurora over time. These guys are in the game but hidden in the pack. Which is good for investors looking for something that hasn't been rallied up yet. It has a lot of hype potential as I would put it.
SUPPORTING FACTS THAT SHOULD FURTHER ELEVATE ALEAFIAS PRICE
Let me ask you a question. Would you rather own a stock after the big money has bought in? Or before the big money has bought in? If you answered after you are letting the smart money take advantage of the bigger gains. I have worked in finance for over seventeen years at the big institutions. These hedge funds, pension funds, mutual fund managers, ETF managers, etc. All have analyst and what do these analyst do. They dig through the books strip out items and find the true cash flow of companies. Sometimes it takes them awhile to get to the not so well known names as they want to not only find a bargain but ride popularity momentum as well. I am hope all the little guys get in before the smart money. So instead of us propping up their price. They prop up our price! I took a look at Aurora, Canopy, and Organigram. They all had anywhere from 12 to 18% smart money ownership and were part of numerous ETF baskets. Aleafia has around 7% smart money ownership which means when it become popular that number should double and maybe even more when all the ETF baskets pick it up as the price moves up.
I went to Simply Wall St to have a look at their numbers. Check it out yourself. They value Aleafia at over $8. This being said they do some discounting calculations which I am not getting into and they used a 5% cost of capital. Which is way too low as Aleafia's cost of capital is around 10%, I had to ascertain this information from the executives by reading between the lines; I was lucky enough to nab a phone interview and bring my hit man economist of the line to get some numbers that allowed us to figure out a value. We anticipate over $2 and that is not trading at a multiple. If you look at all these competitors who have not made a cent. They trade at very high multiples.
I then took a look at insider trading for my above list. While competitor insiders are dumping out, Aleafia's owners are busy buying in. You are welcome to verify this through Simply Wall St or SEDAR.
Three are other elements too. Aleafia is able to product flower at 6 cents to 8 cents a gram and produce identical quality to its competitors. What I really like is originally Aleafia was selling their flower at wholesale (really silly idea) to the competitors. Management stepped in and said woah wait a minute. The money is not in wholesale the money is in taking our flower and turning all of it into products marking it up gastronomically and selling it in stores. So they redirected the ship. As they did the cash flow nears zero. Shortly I think they will finally be in the positive. If and when they do, this thing is going to start sailing past a dollar quickly.
I hope you enjoyed this read. That sheet above took longer than you think. Try breaking out the finances yourself and you will come to the same realizations. I am just trying to save you the time.
All the best in your endeavours!
CaliSpecial33