Alcanna Inc. (TSX: CLIQ) is a retail distribution company, offering alcoholic beverages and cannabis across Canada. Liquor segment drives the majority of the revenue for the company. The group runs its business via retail stores under the names such as Wine & Beyond, Liquor Deport, Ace Liquor, Brown Jug, and Nova Cannabis in Alberta, B.C., and Alaska.

The company delayed its first-quarter FY20 financial result releases in accordance with relief granted by the Canadian Securities Administrators and the Alberta Securities Commission.

FY19 Financial Highlights: For the period ended December 31, 2019, CLIQ reported an impressive set of numbers and posted a significant rise in sales. The group’s sales of FY19 stood at CAD 801.74 million, up ~21.7% from CAD 658.93 million recorded in the previous financial period. The increase was driven by the net addition of the stores during the year. The company reported a jump in operating profit to CAD 32.06 million, from CAD 1.84 million in FY18. CLIQ reported a reduced net loss of CAD 32.57 million, as compared to a net loss of CAD 158.33 million in FY18. During Q4FY19, the company reported a 4.6% growth in the same-store sales in Canadian liquor and a 19.7% increase in total liquor sales over Q4FY18.

FY19 Income Statement Highlights (Source: Company Reports)

Stock Recommendation: The stock has corrected ~43% and ~56% in last three months and one year respectively. In the recent business update, the group mentioned that all the stores are operating as the government declared liquor and cannabis retail as essential services. The group has not witnessed any material impact on its business owing to COVID-19. There is no disruption in the supply chain as well. The company has implemented a lot of cost savings measure during 2019 to support the bottom line. CLIQ is further focusing on improving its gross margin through revising it’s promotional, merchandising and buying strategies for FY20. To weather the COVID-19 impact and protect its balance sheet, the group has reduced its inventory and suspended its planned capital expenditure temporarily. The group also mentioned that it has sufficient capital and credit availability to finance the operating requirements. The group is trading at a forward EV/Sales multiple of 0.1x against the industry average of 0.7x. Hence, considering the aforementioned factors, we recommend a ‘Speculative Buy’ rating on the stock at the closing market price of CAD 2.30 as on May 08, 2020

CLIQ One-Year Daily Price Chart, Source: Refinitiv (Thomson Reuters)

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