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A Hidden Gem Growing Quickly In The Attractive Cannabis Sector

Ryan Allway, CFN Media
0 Comments| September 4, 2018

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California’s cannabis industry is projected to surpass $5 billion in annual revenue by next year, according to Arcview Market Research and BDS Analytics, following the legalization of recreational cannabis earlier this year. With nearly 40 million residents, the state represents about a third of the North American cannabis market, making it the largest single market on the continent, and a key area of focus for investors in the space.

Captor Capital Corp.(CSE: CPTR) has already established a strong footprint in California’s market following its under-the-radar acquisition spree. Investors may want to take a closer look at the stock given management’s proven ability to execute deals and the potential to continue growing its presence in California (as well as outside the state) over the coming years.

Quietly Building a Statewide Brand

Captor Capital is focused on acquiring established cannabis businesses with significant existing revenue that require capital to scale. By following that model, Captor has acquired three dispensaries in key markets across California. Management plans to continue building this network of retail dispensaries to take advantage of the state’s burgeoning industry and ultimately deliver significant value to shareholders over the long-run.

The company recently acquired several cash-generating cannabis dispensaries:

  • MedMen Santa Ana – An 8,148 sq. ft. facility that’s centrally located in Santa Ana, CA — the only city in Orange County, population over 3 million, to allow dispensaries. This location generated about $1.1 million in revenue in Q1 2018, the first few months of full legalization.

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  • MedMen West Hollywood – A 2,010 sq. ft. facility located in West Hollywood, CA, which represents about 10 percent of the Los Angeles cannabis market. The dispensary brought in about $6.4 million in revenue for Q1 2018.

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  • CHAI – Capitola Healing Association Inc., or CHAI, generated $9 million in revenue for the past three years and was purchased for just $6.1 million. It’s consistently ranked as a top-five dispensary in Santa Cruz, CA, with a large glassware showroom and lab-tested, 100% indoor grown product.

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The MedMen-branded dispensaries are particularly appealing given MedMen’s prominence within the industry. As the behind-the-scenes owner of two high-profile dispensaries, the company provides investors with great exposure to the growing brand and two of California’s most popular recreational dispensaries. Based on California’s reported tax revenues, and MedMen’s recent unaudited revenue numbers, MedMen’s stores are outperforming the average dispensary by about 3X revenue.

MedMen figures its stores are, on average, higher grossing per square foot than Apple or Tiffany & Co. stores.

The company is also in the process of acquiring Mellow Extracts and Castroville in California, and owns equity in Fine Detail Greenway, Cascadia Gardens, and Mainstem in Washington State’s market. These new subsidiaries and investments could add millions of dollars in additional revenue, while helping build out a wider distribution footprint in both California and other emerging cannabis markets throughout the country.

Strong Growth, Compelling Value

Captor Capital expects its revenue to grow from just over $8 million in Q1’18 to about $15 million by Q2’19, while EBITDA is projected to reach nearly $4 million by Q2’19, according to its investor presentation. These figures would make it one of the largest retail dispensary networks in the entire state of California, and one of the few cannabis companies that’s actually executing on plans and moving forward with commercialization within the state.

Despite its strong performance, the little publicized company trades at a fraction of other publicly-traded companies operating in the cannabis space, based on its enterprise value-to-LTM sales, which might be due to the low profile the company keeps. Many Canadian licensed producers trade at multiples greater than 100x, while Captor Capital trades at a valuation of less than 10x EV-to-LTM Sales, making it a potentially undervalued opportunity for investors interested in the cannabis space.

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Investors have an opportunity to benefit from the best of both worlds: A top-performing company within California’s burgeoning cannabis market and a potentially undervalued stock within the larger cannabis industry.

Looking Ahead

Captor Capital Corp. (CSE: CPTR) has built an established network of retail dispensaries across California, including MedMen-branded assets in Santa Ana and West Hollywood. With plans to make more acquisitions in the near future, both in California and in other key markets, and significant anticipated revenue growth, there are several potential catalysts on the horizon for the company.

Stay tuned as we follow this company with good growth potential.

Disclaimer

The above article is sponsored content. Emerging Growth LLC, which owns CannabisFN.com and CFN Media, has been hired to create awareness. Please follow the link below to view our full disclosure outlining our compensation: https://www.cannabisfn.com/legal-disclaimer/


FULL DISCLOSURE: Captor Capital Corp. is a paid client of Stockhouse Publishing.




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