Golden Leaf Holdings (GLH-Cse) Dundee initiate full coverage with a BUY and C$2.00 Target Price. We apply a 7x EV/EBITDA multiple to our $22.8 MM 2017 estimate. We visited Golden Leaf in August 2015, viewing all material operations.
Attitudes on marijuana have changed drastically in the US, with a recent poll suggesting 58% of Americans believe cannabis should be legal (see here). That number is up materially from 34% in 2000, and 23% in the 1990s. This acceptance has translated into four US states legalizing cannabis for recreational sale, creating a new commercial opportunity for investors and entrepreneurs alike. Golden Leaf is front and center in this revolution, ranking as one of the largest North American cannabis extract companies and a thought leader through its R&D division in Israel. Generating in excess of $1 MM sales per month, growth could increase materially as Oregon's recreational market picks up speed (legalized 1-Oct-15, flower only), and GLH enters new markets through M&A (Washington State & Nevada). Trading at 2.7x 17E EV/EBITDA vs. 5.9x for peers (see Page 6), we believe GLH presents an attractive investment opportunity.
Exposure to US Recreational Marijuana Through a Market Leader
Market leader in Oregon - Oregon has potential to be a $500 MM+ recreational market, in addition to the $145 MM long-established medicinal market. Golden Leaf is a leader in the state, and on pace to double its market share in 2016.
Experienced management meets industry expertise - Led by CEO Don Robinson (former CEO of Cara Foods), GLH has an impressive suite of CPG and food service executives combined with Oregon natives experienced in cannabis (10+ years). |
