Canopy Growth Corp (WEED)

[Wo]

one is gmp securities, not sure who the other is yet. i tried contacting those listed on the web page to no avail. excuse the format. quick cut and paste
see link here
http://personal.crocodoc.com/0H5aWQR

Tweed Marijuana Inc.1,7
TWD-TSXV
November 3, 2014
Equity Research
BUY
C$1.80
C$3.50
Last:
Target:
Initiating coverage: Tweed beginning to flower
Tweed is one of a handful of Canadian companies growing, harvesting and
selling medical marijuana under Health Canada’s Marihuana for Medical
Purposes Regulations. This new program from Health Canada took effect on
April 1, 2014 and eased the requirements to access medical marijuana.
Rating
Target
Revenue 2014E (mm)
Revenue 2015E (mm)
Revenue 2016E (mm)
EPS f.d. 2014E
EPS f.d. 2015E
EPS f.d. 2016E
BUY
$3.50
$1.7
$24.5
$37.2
($0.84)
$0.18
$0.29
Share Data
Share o/s (mm, basic/f.d.)
52-week high/low
Market cap (mm)
EV (mm)
Net debt (mm)
Dividend
Dividend yield
Projected return
39.9 / 42.7
4.75 / 1.77
$71.9
$64.6
($12.2)
n/a
n/a
94.4%
Financial Data
FYE Dec. 31
2014E
2015E
Revenue (mm)
$1.7
$24.5
EBITDA (mm)
($4.0)
$10.5
EV/EBITDA
nmf
6.5x
EPS (f.d.)
($0.84)
$0.18
P/E
nmf
9.7x
CFPS
($0.29)
$0.21
P/CF
nmf
8.4x
Net debt (mm)
($4.7)
($8.3)
BVPS
$0.69
$0.73
P/BV
2.6x
2.5x
All figures in C$ unless otherwise noted
2016E
$37.2
$19.2
3.0x
$0.29
6.2x
$0.31
5.8x
($18.9)
$1.03
1.7x
These new rules are expected to dramatically transform the industry and
lead to significant growth in the consumption of medical marijuana over the
next 10 years, potentially exceeding 25% per annum in the near-to-medium
term. Tweed, with its considerable earnings power potential, is an excellent
opportunity for investors to get exposure to this rapidly growing industry.
Our positive outlook on Tweed is based on the following:
? Appealing risk-reward profile. Our target price represents a potential
return of +94% and we believe the medium-term upside could be
greater as Tweed executes on its growth plans. Tweed shares are
currently trading near their lows since being public as investors seem to
have priced in significant execution risks. Hence a valuation of ~3x our
forward 2016E EBITDA and 6x our forward 2016E earnings provides
investors with an attractive entry point.
? Early mover advantage. Tweed offers investors one of the best and
highest quality exposures to the medical marijuana industry. The
company’s near-term production profile is much larger than other
publicly traded peers and its brand awareness and media coverage has
been impressive - an important consideration in view of the advertising
restrictions Licensed Producers face.
? Attractive industry dynamics. We believe that the Canadian government
has created a healthy industry structure by heavily regulating the supply
of medical marijuana thereby creating high barriers to entry and sticky
patient relationships. Tweed, which has the potential to be the largest
producer in the industry, should be a main beneficiary of this favorable
environment.
We are initiating coverage of Tweed with a BUY rating and a $3.50 target
price. Our target price is derived from the average of a 12x multiple on our
2016 EPS estimates, a 7x EBITDA multiple on our 2016 estimates and a DCF
calculation.
Martin Landry, CPA, CA
[e-mail]
Joshua Bridges
[e-mail]
See important disclosures on the last two pages of this repor