TSX:JWEL - Post Discussion
Post by
retiredcf on Dec 28, 2022 10:04am
TD
December 21, 2022
Our Action List Picks
Jamieson Wellness Inc.
JWEL-T: C$35.03; ACTION LIST BUY 12-Month Target: C$50.00
Our ACTION LIST BUY rating is mainly predicated on the substantial U.S. opportunity following JWEL's recent acquisition of Nutrawise, which we believe should provide it with: 1) a strong platform in the world's largest VMS market (US $50 billion+); 2) an opportunity for meaningful category expansion in the U.S., accelerated by JWEL's diverse product offering, fewer regulatory hurdles, and omni- channel presence; and 3) synergies in distribution, operations, and marketing. We estimate that if JWEL were to double Nutrawise's revenues from here (i.e., capturing another 0.25% of the U.S. VMS market), it would add ~$12.00 to our target price. In 2023, we expect JWEL to start harvesting the lower hanging fruit in category expansion, given the attractive market qualities highlighted above and a more engaged U.S. consumer base (i.e., per capita VMS consumption is 3x of that in Canada) due to higher healthcare costs. Internationally, we view JWEL's recent acquisition of its Chinese distribution partner as an important step in growing its brand with a direct go-to-market strategy in China, leveraging its 1) capital-light strategy; 2) status as the leading international VMS brand (by number of product registrations); and 3) global retail partnership with Costco.
We believe the long term upside of the share price is also supported by: 1) a mature Canadian base business, albeit with mid to high single-digit organic growth driven by relatively inelastic VMS demand, sticky repeat purchases by a loyal and quality- focused customer base, and a robust innovation pipeline; 2) strong FCF generation that should accelerate deleveraging and support dividend growth; and 3) attractive valuation (trading at 12.8x forward consensus adj. EBITDA versus two-/five-year averages of 14.4x/14.6x). Overall, we continue to like the company's defensive growth attributes and argue that even modest success in the U.S. could push the shares well north of our $50.00 target price over time.
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