Raymond James analyst Rahul Sarugaser likes the path Aleafia Gesundheitia (Aleafia Health Stock Quote, Chart, News, Analysts, Financials TSX: AH) moves, saying in a corporate letter to customers Wednesday that investors should have better days ahead of them for both the company and the stock.
Aleafia Health, based in Ontario, is a licensed medical and recycled cannabis producer, a direct cannabis supplier to consumers, and the largest provider of cannabis health services in the country. Aleafia has signed agreements on insured medical cannabis services with some of Canada’s largest unions and employers, including Unifor, the country’s largest private sector union.
In his report, Sarugaser commented on a spate of recent announcements from Aleafia, beginning June 3 with the first export of medical cannabis to Germany. Aleafia sent dried flowers grown in its Niagara greenhouse, including the company’s THC strain, Sour Kush, and marked a milestone for the company in entering the German legal cannabis market.
“This is AH’s second major international export market after Australia,” wrote Sarugaser. “AH states that there will be two more deliveries to Australia in the short and medium term, the first of which will be shipped in June.”
On June 10th, Aleafia launched four new large format products under its “Everyday Cannabis” brand Divvy. Available in 14 gram bags and a 10 gram range of pre-ground flowers in the dried flower and pre-roll categories. On launching Divvy, Sarugaser said that low-cost growing AH in its Niagara greenhouse and growing it outdoors in Port Perry should give the company a material cost advantage in goods sold compared to most of its peers in the value segment of the cannabis market.
Then on June 14th, Aleafia launched a peppermint-scented CBD roll-on for the company’s wellness product brand Noon & Night, followed by the 15th. Ontario is expanding last year’s facility, adding 31,200kg of dried flowers to a harvesting expense of $ 0.10 per gram produced.
“Due to the enormous diligence and hard work of our operating team, we are ready to take another big step in outdoor cultivation this year. After completing all of the infrastructure and securing licenses last year, Port Perry has grown into a state-of-the-art year-round operation that we expect will significantly improve our overall bottom line, “said Geoffrey Benic, CEO of Aleafia Health, in a press release .
Commenting on the Port Perry cultivation, Sarugaser said, “The outdoor harvest strengthens AH’s adult consumer brands such as Divvy with its large-format, high-quality cannabis flower offerings, and serves as input for AH’s adult derivatives and its CBD-focused products. Wellness product line (e.g. Noon & Night). “
Sarugaser said all of the above events help show how Aleafia is making progress towards its strategic goals. Turning to the adult market, Sarugaser said AH saw sequential sales growth of over 70 percent in the adult channel for the month of May, a sign that the company’s escalation of SKUs for the Rec market is starting to pay off through profit Market share.
In the medical services sector, Sarugaser expects small contributions from the company’s exclusive agreement with Unifor in the current second quarter, with business starting in the second half of the year. The analyst noted that Ford Motor Company was the first major employer to ratify a medical cannabis program for its employees, with participation recently beginning, while Sarugaser sees General Motors as one of the next to initiate participation.
With the update, Sarugaser confirmed its “Outperform 2” rating for Aleafia. Looking ahead, the analyst calls for AH to generate revenue of $ 64 million and $ 102 million, respectively, in 2021 and 2022, and EBITDA of $ 3 million and $ 10 million in 2021 and 2022, respectively or.
“AH’s positive sales data on adult consumption, combined with its typically large, seasonal LP-to-LP sales from the field crop, combined with its steadily growing Canadian medical cannabis revenues, combined with solid advances in international medical exports.” Cannabis, make us optimistic about AH shares in the coming quarters. From our point of view, AH is on the way up, ”said Sarugaser.
Aleafia last released its financial data in mid-May when a decline in the company’s domestic wholesale business caused total revenue to decline from $ 13.7 million a year ago to $ 6.2 million in the first quarter of 2021. By segment, net medical cannabis sales rose 95 percent for the year – Net adult cannabis use rose 143 percent to $ 1.7 million from last year to $ 2.7 million and net wholesale sales were down 84 percent back to $ 1.9 million.
“To continue expanding our product portfolio, we have only just begun introducing our highly differentiated medical cannabis ecosystem through the groundbreaking exclusive agreement with Unifor, Canada’s largest private sector union,” Benic said in a press release.
“The ability to serve a captive audience of union members who are receiving medical cannabis insurance is an important catalyst. We believe this will set the course for a strong 2021, driven by repeatable, profitable sales in the medical, adult and international markets, ”he said.