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Home > Boards > Canadian > Cannabis > Cannabis Wheaton Income Corp. (TSXV:CBW)

My personal opinion is that it will like

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Spetty772002   Tuesday, 10/03/17 08:52:15 PM
Re: chasem post# 68
Post # of 86 
My personal opinion is that it will like fall between 10-12X estimated 2019 EBITA which would represent a 1100%-1300% s increase from the current share price of ~.80 which I think would work for most people over the course of the next 2-3 years.


Assumptions;

1) Per page 16 of 23 of the Investor Presentation PDF, their target EBITA/ gram is >$5.25 so I'm going to call it $5

2) 2. Multiple streams across Canada with anticipated 2019 year end annual runrate production of >115,000 kg x 1000 = 115,000,000 grams

3) CURRENT CONSENSUS AMONGST THE EQUITY RESEARCH COMMUNITY IS TO VALUE LICENSED PRODUCERS AT AN ENTERPRISE VALUE (EV) OF 4-10X 2021E EBITDA.

4) ROYALTY COMPANIES WITH SIMILAR MODELS IN THE MINING SPACE TYPICALLY TRADE AT AN AVERAGE OF 19X FORWARD EBITDA VS 7X FOR THEIR OPERATING PEERS.

5) Exchange rate: 0.814368 USD. Sep 19, 2017

6) $575,000,000 x 5 times 2019 EBITA =$2,875,000,000 market cap /estimated 500 million shares = $5.75/share x 0.814368 USD = $4.68/share = 585% current value

$575,000,000 x 10 times 2019 EBITA = $5,750,000,000 market cap / estimated 500 million shares = $11.50/share x 0.814368 USD = $9.37/share = 1,171% of current value

$575,000,000 x 15 times 2019 EBITA = $8,625,000,000 market cap /estimated 500 million shares = $17.25/share x $ 0.814368 USD = $14.05/share = 1,756% of current value

$575,000,000 x 19 times 2019 EBITA = $10,925,000,000 market cap / estimated 500 million shares = $21.85/share x 0.814368 USD = $17.79/share = 2,274% of current value ***note that this is the average multiple that streaming companies like Cannabis Wheaton typically command***


***The valuations above give Cannabis Wheaton no credit for the ownership interest that they obtain in each streaming partner's company in addition to the marijuana stream. The ownership %'s range from 10-50% depending on the risk profile and streaming partner and structure of each streaming deal

***A couple of areas where I'm being conservative across the board includes reducing their EBITA per gram by > 5% from their estimate of $5.25

***All of the other comparable companies are being valued on a multiple of 2021 EBITA however I can only extrapolate through 2019 for Cannabis Wheaton. We'd assume that Cannabis Wheaton's 2021 EBITA will be higher than 2019's but I'm giving them credit for zero EBITA growth for the last two years of 2020 and 2021

***The industry average is 100 grams produced per sq ft. and presentation states that they anticipate 1.4 million sq ft so that would equate to 140,000,000 grams produced per year but the company is estimating >115,000,000 so there is potentially a 25,000,000 gram level of safety

***Cannabis Wheaton is a pure streaming company which, if the industry average for metal mining companies are truly trading at an average 19x 2021 EBITA, there is a good probability Cannabis Wheaton could trade at a higher multiple as mining producers royalty streams are limited to the life of the mine whereas Cannabis Wheaton's streams are all guaranteed for 99 years

***There are currently approx 335,000,000 fully-diluted shares outstanding. This includes a 35 million share issuance announced today. I'm estimating that the company will issue another 165 million shares for a total of 500 million total shares, for the purposes which is I feel is extremely conservative

I'd be interested in any feedback from anyone wants to provide any analysis or point out any errors in my figures


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