Village Farms International Inc

Village Farms International Inc (TSX: VFF) is one of the largest and longest-operating greenhouse growers in North America. The Company leverages decades of experience in large-scale, low-cost intensive agriculture as a vertically integrated produce supplier to pursue high-value, high-growth plant-based Consumer Packaged Goods opportunities in cannabis and CBD in North America and select markets internationally.

Key Highlights

• Encouraging Top-line performance: In Q3 2021 the company reported strong top-line growth at USD 72.4 million, as compared to USD 43.0 million in the previous corresponding period. An inclusion the Canadian cannabis and U.S. cannabis revenues post acquisition were the main reason behind higher revenue. The company’s favorable brand performance and higher market share also played a crucial role.
• Favoring conditions in the United States: The company is encouraged by the federal cannabis bill recently brought forward by Senate leadership and view it as an integral step in the process of regulatory change that would allow it to participate in the high-THC cannabis market in the U.S
• Acquired Balanced Health Botanicals: On August 16, 2021, the company reported the acquisition of Balanced Health Botanicals including its established e-commerce platform, CBDistillery at a price consideration of   USD 75 million, through USD 30 million in cash and the rest through common shares of VFF. The above would provide immediate access to the US retail CBD market through its well-established brands, profitable business, prominent E-commerce platform, established retail channels and a growing customer base.
  

Financial overview of Q3 2021 (In thousands of United States dollars)

Source: Company

• The company announced its quarterly results, wherein it reported sales of USD 72.4 million, jumped from USD 0 million in pcp. The increase was driven by strong growth from the Cannabis segment.
• Gross profit stood at USD 17.7 million, which climbed from USD 5.6 million in pcp, supported by elevated sales, partially offset by higher cost of sales.
• The quarter was marked by significantly higher selling, general and administrative expenses, an increase in interest expense, and higher share-based compensation.
• In the reported period the company’s net income was of USD 0.7 million against USD 0.5 million in pcp.

Risks associated with investment

The company is exposed to variety of risks ranging from regulatory risk, intense competition, and resurgence in COVID-19 cases could further dent the company’s demand. Furthermore, disruption in the supply chain, inability to sustain pricing and inventory models, lack of long-term client commitments, etc. are some other key risks. 

Valuation Methodology (Illustrative): EV to Sales

(Note: All forecasted figures and peers have been taken from Thomson Reuters).

Stock recommendation

VFF is one of Canada’s best Selling Cannabis Brands, which offers products like dried flower, vapes, bottled oil etc. Moreover, the recent acquisition of BHB would expands the company’s footprint across the US market, wherein the opportunity for hemp-derived CBD products remains very high.  Furthermore, the company is continuously monitoring the developments in cannabis legislation in US. and is seeking for an opportunity to leverage its exceptional U.S. greenhouse operations for the U.S. high-THC market, when permitted to do so. Hence considering the aforesaid facts, we recommend a ‘Speculative Buy’ rating on the stock at the closing price of CAD 11.11 on November 12, 2021. We have considered Trulieve Cannabis Corp, Valens Company Inc, Agrify Corp, etc. as the peer group for comparison.

One-Year Technical Price Chart (as on November 12, 2021). Source: REFINITIV, Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV. 

Premier Health of America Inc.

Premier Health of America Inc. (TSXV: PHA) is a Canadian Healthtech company that provides a broad range of staffing and outsourced services solutions for healthcare for governments, corporations, and individuals.

Key Updates:

• Improved cash flows: For 9MFY21, the company reported its cash from operations of CAD 1.657 million, higher than CAD 0.651 million in pcp, supported by a net income of CAD 2.177 million v/s a net loss of CAD 0.172 million in pcp. This implies improved liquidity condition of the company.

• Secured Government Contracts: Recently, the company started its second five-year paratransit contract, which was awarded by the Government of Quebec in March 2021. Within the contract, the company would provide non-ambulatory adapted medical transport facilities required to transfer patients for treatments and medical appointments between facilities in light vehicles along with specialized equipment such as multi-position chairs, bariatric chairs, central oxygen devices, etc. 
  

• Adjusted EBITDA expansion: For 9MFY21, the company’s reported a significant jump in its adjusted EBIDTA. Adjusted EBITDA for 9MFY21 stood at CAD 4.21 million as compared to CAD 1.51 million reported in 9MFY20. This was primarily drive by solid jump in topline and cost control measured exercised by the management.

Q3FY21 Financial Highlights:

• During the quarter under consideration, the company’s reported revenue surged by 238% to CAD 18.64 million vs CAD 5.51 million reported in the corresponding previous financial year.
• Gross margin surged by 198% to CAD 4.47 million as compared to CAD 1.5 million reported in the same period of the previous financial year.
• EBITDA nudged by 140% to CAD 1.31 million vs. CAD 0.55 million reported in the same quarter of the previous financial year.
• Net income in third quarter of the FY21 surged by ~60% to CAD 0.636 million compared to CAD 0.398 million reported in Q3FY20.

Source: Company Report

Risks: Talent retention because shortage of healthcare personnel in many of the regions in which the Corporation operates.  Further, the company is exposed to lower demand offtake of its services amid heightened competition.

Valuation Methodology (Illustrative): Price to Earnings-based

(Note: All forecasted figures and peers have been taken from Thomson Reuters). 

Stock Recommendation

The company reported solid financial performance in Q3FY21, with revenue nudged by 238%, gross profit bolstered by 198%, EBITDA soared up by 140 and net income surged by 140% respectively.  Also, recent contracts secured from Government could also bring organic growth in coming quarters. However, company is also exposed to risks highlighted above, hence we recommend a ‘Speculative Buy’ rating on the stock of PFA at the last traded price of CAD 0.81 on November 12, 2021.

One-Year Price Chart (as on November 12, 2021). Source: Refinitiv (Thomson Reuters)

*The reference data in this report has been partly sourced from REFINITI

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.