Delta 9 Cannabis Inc DLTNF

Research Capitol Initiates 1.00$ Price target.

[Oceanis]

 

Delta 9 Cannabis Inc. - BUY

ACTION – Initiating Coverage with BUY Rating and $1.00 Target Price

Delta 9’s Retail Expansion with a focus on Return on Invested Capital is the Key Value Driver over the Long-term

Current Market Price is Deeply Discounting Delta 9’s Retail and Wholesale Segments

Visibility over Retail Expansion and Wholesale Revenue generation beyond Manitoba to Improve the Valuation Multiples for Delta 9

Retail Expansion Strategy with a Focus on Prudent Capital Allocation: We expect the retail segment’s sales to be the key growth driver for Delta 9’s topline over the long-term. We note that Delta 9 has been able to maintain a meaningful retail cannabis market share (figure 3) in Canada, despite having a major presence in only the province of Manitoba. Manitoba constitutes around only 4% of overall Canadian retail sales. Given Delta 9’s strategy to expand its retail footprint across Canada, and the large addressable market for the Canadian retail cannabis market, we view a meaningful upside to the retail segment’s topline. Currently, Delta 9 has 16 retail stores out of which 11 are located in Manitoba. Considering factors such as average revenue per store and average investment per store,
we observe that Delta 9 has demonstrated prudent capital allocation skills thus far. As Delta 9 considers expanding into more saturated markets, such as Alberta, both organically and inorganically, we believe that prudent capital allocation will play a critical role in generating value for shareholders. Overall, we are optimistic in Delta 9’s ability to gain retail market share over the long-term. We expect Delta 9 to improve its retail cannabis market share to around 1.5% over the long-term, compared to its current market share of 1.1%.

Current Market Price Implies a Significant Valuation Gap versus Peers: Delta 9 has a hybrid business model which has exposure to both retail and wholesale operations. We have analyzed the fundamentals of Delta 9’s retail and wholesale operations on a stand- alone basis with respect to major retail players and LPs in Canada. Based on our analysis, we view Delta 9’s retail and wholesale operations to be deeply discounted by the market.

Key Catalysts for the Share Price: Expansion of Delta 9’s retail footprint and wholesale revenue generation beyond Manitoba will be the main trigger for Delta 9’s share price, as we believe that broader market might be perceiving Delta 9 as a company with an addressable market confined to only the province of Manitoba. Margin improvement driven by Delta 9’s focus on ancillary sales, incremental sales by data sharing and premium shelf space agreements with LPs may lead to an improvement in valuation multiples. Visibility over the sustainability of Delta 9’s market share in retail and wholesale segments will be a key catalyst for the stock price, over the long-term.

INITIATING COVERAGE

Monday, September 27, 2021

 

[gnote1]

Good find, word will start to get out with added analyst coverage. 1.00 based on Retail and Wholesale. B2b is the variable. B2b could be huge quickly when the US opens up.  John and Co. are down in Las Vegas this week displaying the Pod system at the conference. All good and future looks bright. 

[Oceanis]

that's exiting in terms of Vegas must be nice to travel right now!  In terms of research Capital it's a huge assessment of the company, some 20 or more pages long or more check it out.  Tons and tons of info.

[Binkyman69]

Research Capitol.. aren't they involved w mackie.. I think they put out a buy rating w price target of 2 to 3 dollars per share just weeks after debentures were finalized... SP immediately shorted to where it is now. Mackie was one of the underwriters for the debentures...I think I'll disregard what they say when their analysts are putting buy ratings on companies right before the company

[Oceanis]

That's kinda weird you've the same writing style (exactly) as Northboy44 with all the .. and ... between your sentences and he also doesn't like when good things are said about d9!  Coincidence? haha.lol.

[golfyeti]

[Blackberry5]

Loving yesterday's buy back shares/debentures news too.  Whether they exercise them who knows, but I sure hope so; I smell an instituitional investment and hope it's big tobacco. Namely Imperial.