Facedrive Inc.

Facedrive Inc. (TSXV: FD) is a new-age technology company; wherein the customers can request rides in electric, hybrid and gas-powered vehicles through the Facedrive App, to offer a transportation network that was first and foremost socially responsible and CO2 emissions neutral.

Key Highlights:

• Recently, the company reported that it has developed COVID-19 contact tracing solution, named TraceSCAN, and would be implemented as a pilot project by the Waywayseecappo First Nation located in Western Manitoba. The implementation is expected to begin prior to the end of 2020 and is expected to last at least 30 days. As per the Management, the above application is meant to trace COVID-19 patients and would help to restrict the spread of the virus.
• The stock of FD gained handsomely in the recent past and appreciated ~477% and ~595% in the last nine months and one year, respectively. The stock closed above the crucial support level of 100-days, 150-days and 200-days simple moving average (SMA), indicating a bullish price trend.

Q3FY20 Financial Highlights:

• FD announced its quarterly results, wherein the company posted a higher revenue of CAD 0.266 million, as compared to CAD 0.195 million in the previous corresponding period (pcp).
• Total Operating expenses stood at CAD 3.85 million, as compared to CAD 1.34 million in pcp. The company reported an operating loss of CAD 3.58 million, higher than a loss of CAD 1.151 million in the previous corresponding period, due to a higher operating expense.
• The company’s net loss stood at CAD 3.524 million, slightly below CAD 3.527 million in pcp, due to inclusion of listing expense of CAD 2.376 million in Q3FY19.
• Cash and cash equivalent of CAD 7.36 million, while total assets stood at CAD 27.765 million.

Q3FY20 Income Statement Highlights (Source: Company Reports)

Risks: The group’s operating expenses have increased in the recent past, which is a reason for concern for the company. The solutions which are provided by the company can be replaced by other information technology firms, and hence might lead to price competition.

Stock Recommendation:

The idea of TraceSCAN solution is promising, and proper implementation of the project would bring strong business prospects for the company. As per the Company, other applications like Facedrive Food, Facedrive Health and Facedrive Marketplace would generate revenues in the coming quarters, which is a key positive. The stock is trading in a bullish zone and at the last closing price, the stock traded well above the technical support level. However, the company is battling with higher expenses and has reported higher R&D expenses due to higher third-party fees. Moreover, price competition might arise due to the entry of several players within the segment. Hence, considering the aforesaid facts, current price movements, we recommend a ‘Speculative Buy’ rating on the stock at the closing price of CAD 16.25 on December 31, 2020.

FD Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Organigram Inc.

Organigram Inc. (TSX: OGI) is a licensed producer of cannabis products. Organigram focuses on producing exceptional, indoor-grown cannabis for patients and adult recreational consumers, as well as developing global business partnerships.

Key Updates:

• Expanding Product portfolio: Recently, the company reported that it would launch three variants of on-trend dried flower products (targeted for adult consumers) such as Black Cherry Punch, Ice Cream Cake and Slurricane. The management is confident that these variants would add improved business prospects through increase consumer traction. Earlier, OGI announces the launch of Trailblazer Spark, Flicker and Glow 510-thread Torch vape cartridges in a new 1gm format. We expect that with the increasing usage of vapes within the adult-use recreational market; OGI is highly poised to utilize the upcoming demand within the segment.
• Robust demand for Cannabis product: In the recent past, the Canadian economy has witnessed a growing demand for the adult-use recreational market, which has resulted in strong momentum in the retail presence. In the last three months, a number of license stores grew by three times, which is noteworthy.

Source: Company Presentation

Q4FY20 Financial Highlights:

• OGI announced its quarterly results, wherein the company posted its gross revenue at CAD 25.389 million, as compared to CAD 19.235 million in the previous corresponding period (pcp). The gross revenue surged by 32% on a YoY basis. However, on account of significantly higher excise taxes paid by the company, the group’s net revenue stood at CAD 20.4 million, reflecting an increase of 25% on a YoY basis.
• The growth in the revenue was driven by new launches, which includes new high THC strains, and newly value segment offerings during July 2020, which received higher tractions from the customers.
• The company posted a gross loss of CAD 28.756 million, as compared to a loss of CAD 11.059 million in pcp, due to significantly higher cost of sales and an increase of 87% in cost on sales against the same period of the last year.
• Adjusted EBITDA loss stood lower at CAD 2.663 million, as compared to a loss of CAD 7.163 million in Q4FY19.
• OGI posted a net loss of CAD 38.590 million, versus a net loss of CAD 22.456 million in Q4FY19.                                  

Q4FY20 Financial Highlights (Source: Company Reports)

Risks: The group reported an ~125% y-o-y increase in the long-term-debt to CAD 103.671 million, which poses a balance sheet risk for the company.

Valuation Methodology: EV to Sales Based (Illustrative)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: In the fourth quarter of 2020, the company reported decent topline performance. The company has decent liquidity with cash and short-term investments at the end of the fourth quarter of FY20 stood at CAD 74.728 million, increased ~56% on y-o-y basis. Also, the company’s current ratio stood 5.65x against the industry median of 2.84x, implies a better liquidity profile despite a significant increase in debt in the company’s balance sheet. Further, the group has made ~CAD 15 million worth of investment across high-speed, high-capacity, fully automated production line that includes advanced engineering, robotics, high-speed labelling, automated carton packing.  Also, the company is expanding its product mix and geographical mix, which is going to support the company’s operations and financials in the coming quarters. We have valued the stock using EV to sales based relative valuation method and have arrived at a target upside of double-digit (in percentage terms). For the said purposes, we have considered peers like Aphria Inc, Hexo Corp etc. Hence, considering the above factors and price trend in the stock, we recommend a ‘Speculative Buy’ rating on the stock at the closing market price of CAD 1.69 on December 31, 2020.

1-Year Price Chart (as on December 31, 2020). Source: Refinitiv (Thomson Reuters)

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.