May 22, 2019
Jamie Blundell, President & COO is pleased to provide the following update on Vireo Health, one of CGOC’s public holdings:
Vireo Health International Inc. (“Vireo”, or “VREO”) (CSE: VREO), one of CGOC’s public portfolio holdings is now covered by M Partners, who initiated coverage yesterday, with a BUY rating and a target price of $9.25.
Excerpts from Initiation Report:
- Vireo offers value in the U.S. cannabis market.VREO trades at a discount despite being part of a select few Multi-State Operators with assets in 10 or more states. The Company is priced very attractively at 6.5x 2021 EBITDA vs. U.S. peers at 12.0x 2021 EBITDA. We expect Vireo to close this gap as it continues to build its footprint, expand cultivation capacity and its distribution network.
- Vireo has proven execution in key states.Led by Dr. Kyle Kingsley, a former emergency medicine physician, the executive team has established a track record of winning merit-based licenses in attractive jurisdictions (Minnesota, New York, Pennsylvania, Maryland and Ohio). In 2018, the Company generated revenue of $18.5M in Minnesota, New York and Pennsylvania. We believe Vireo will continue to make significant progress in all three markets as it rolls out new dispensaries, expands existing retail locations and begins to plant industrial hemp for IP development. We believe management’s proven ability to execute will be crucial in ensuring successful launches in seven new states (Maryland, Ohio, Rhode Island, Arizona, Nevada, Massachusetts and New Mexico) and in Puerto Rico and California, upon the closing of pending transactions.
- Funded and ready to grow.In conjunction with its RTO on March 20, 2019, the Company raised US$51.4M at a share price of US$4.25 (C$5.67) providing flexibility to pursue value enhancing initiatives. Vireo can now use the funds on further M&A activity, capacity expansion projects, dispensary rollouts and the continued development of IP.
- Vireo is differentiated through its IP focus. Vireo is uniquely positioned as an IP-focused MSO that is driving innovation both in medical cannabis and in the genetics of industrial hemp. For instance the Company is developing Captisol-Enabled Intravenous Cannabinoid Formulations, which may in the future be a substitute for opioid-based narcotics. In addition to medical cannabis products, Vireo is leveraging its hemp producing assets in Minnesota and New York to develop IP that efficiently scales industrial hemp production. We believe that while the MSO model will drive Vireo’s initial growth, its IP sets it apart and will sustain growth over the long run.
- We value Vireo based on 12.0x 2021E EBITDA, in line with its MSO peers. We anticipate strong performance from the Company moving forward as it begins to generate revenue in the seven additional states in which it has recently entered. The Company is currently trading at 6.5x 2021E EBITDA, implying an 85% return to target.
Vireo Health International, Inc. is America’s leading science-focused, multi-state cannabis company. Vireo’s physician-led team of more than 300 employees provides best-in-class cannabis products and customer experience. Vireo cultivates cannabis in environmentally-friendly greenhouses, manufactures pharmaceutical-grade cannabis extracts, and sells its products at both company-owned and third-party dispensaries. The Company currently has operations in eight states including Arizona, Maryland, Minnesota, New Mexico, New York, Ohio, Pennsylvania, and Rhode Island.
For more information about the company, please visit www.vireohealth.com
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