Flora Growth Corp (FLGC)

[MoneyForNuthin]

$FLGC Argus Research Initiates Equity Research Report Coverage on Flora Growth Corp. (NASDAQ: FLGC)

https://www.prnewswire.com/news-releases/argus-research-initiates-equity-research-report-coverage-on-flora-growth-corp-nasdaq-flgc-301340523.html

NEW YORK, July 26, 2021 /PRNewswire/ -- Argus Research, an independent investment research firm, has launched Equity Research Report coverage on Flora Growth Corp. (NASDAQ: FLGC)

COMPANY HIGHLIGHTS: Excerpts (as conveyed by Argus Analyst Steve Silver) include:

FLGC: A Fast-Growing Global Cannabis Cultivator and Brand Builder
Flora Growth leverages cost-effective cannabis cultivation in Colombia to supply cannabis and its derivatives for an expanding range of products, including cosmetics, pharmaceuticals, food and beverages, and hemp-based textiles.

The company's outdoor cultivation operation in Colombia — along the equator and at an altitude of 1500 meters above sea level — benefits from favorable weather that allows for year-round organic growing.

Flora's production costs are also significantly lower than those of its Colombian peers, at less than $0.06 per gram.

To complement its cultivation capabilities, Flora is building an extraction and processing facility in Colombia. It is also developing a wholesale cannabis distribution business, and is expanding internationally through acquisitions and partnerships.

In our view, Flora Growth is well capitalized, with $30 million in proceeds from a December 2020 private financing, $16.6 million in IPO proceeds, and the expected infusion of more than $20 million from the exercise of warrants.

We believe that Flora is attractively valued relative to peers based on its low cost structure, strong brand portfolio, and expanding global distribution. Based on our EV/revenue analysis, our fair value estimate for FLGC is $7.50 per share, more than two-times current levels.

Founded in 2019, Flora Growth leverages cost-effective cannabis cultivation in Colombia to supply cannabis and its derivatives for an expanding range of products, including cosmetics, pharmaceuticals, food and beverages, and hemp-based textiles.

In our view, Flora Growth is well positioned to participate in a global cannabis market that BDS Analytics projects will reach $56 billion by 2026, up from $21 billion in 2020. The company's outdoor cultivation operation in Colombia — along the equator and at an altitude of 1500 meters above sea level — benefits from favorable weather that allows for year-round organic growing, and is expected to yield three annual crop cycles, compared with 1-2 cycles in other regions. These operations also have low water and electricity costs. Due to the open-air cultivation, its crop has shown more-robust growth yields over greenhouse cultivated crops, and a richer terpene profile, which enhances the flower's aroma. Flora's operations also benefit from a highly skilled agricultural workforce, with labor costs that are approximately 10% of those for comparable operations in the United States.

https://www.argusresearch.com/

Argus Initiates Sponsored Research Coverage 7/22/2021
Argus Sponsored Research ReportsFlora Growth Corp. (NASDAQ: FLGC)

https://www.argusresearch.com/PDFDownloader3.aspx?id=MDAwMDAwOTk3OA==aAB0AHQAcAA6AC8ALwByAGUAcwBvAHUAcgBjAGUAcwAuAGEAcgBnAHUAcwByAGUAcwBlAGEAcgBjAGgALgBjAG8AbQAvAHIAZQBwAG8AcgB0AHMALwAwADAALwAwADAALwA2ADAALwA5ADIALwAxADAALQA1AEYAOQBEAEMARQBEAEQALQAwADUARAA0AC0ANAAyADMAQQAtAEIAQwAyADIALQAzAEMAMgA4ADUARgAwAEUAQwA5ADEANgAuAHAAZABmAA==

VALUATION
Since the company’s May 2021 IPO, Flora Growth shares have traded below their offering price of $5.00 per share. They recently traded at $3.24 per share, implying a market cap of approximately $135 million. We attribute this decline to the early stage of the company’s commercial rollout, and believe that the current valuation does not adequately reflect the company’s progress on multiple strategic initiatives and prospects for robust revenue generation in the near term. In addition, we note that company executives, directors and 5% holders own nearly 50% of the shares, which we view favorably for long-term value creation. As such, we expect Flora to attract investors as it reports revenue growth over the remainder of 2021 and completes planned acquisitions.

Flora is trading at a projected 2022 EV/revenue multiple of 3.8-times. In comparison, its peers operating in Colombia are currently trading at a trailing 12-month average multiple of 27.8-times. These peers include Clever Leaves (Nasdaq: CLVR, with a multiple of 16); Khiron Life Sciences (TSXV: KHRN, 5); Avicanna (TSX: AVCN, 26.7); and PharmaCielo (TSXV: PCLO, 63.4). We believe that a normalized forward multiple of 15, is warranted for high-growth cannabis companies such as Flora.

Applying a multiple of 15 to our 2022 revenue estimate of $32 million, and assuming $30 million in cash, we calculate an enterprise value of $450 million. We discount this EV back one period at 10%, to $405 million, and divide by the share count of 54.4 million to arrive at a fair value estimate for FLGC of $7.50 per share, more than two-times the recent price of $3.24.