We have updated our Aphria research pitch, including the impact of COVID-19 on our forecast. We have also updated our recommendation, price target, and cannabis price/demand curves. We have also made our Aphria financial model available.
APHA.TO
17 posts
We recently toured both Aphria’s and Canopy Growth’s primary facilities in Ontario. This is Part 1 of our two part series. This 42-slide presentation includes detailed estimated cost breakdowns of Aphria’s energy, labour, TFW program, oil extraction, product and other costs. Our 5-hour tour included examining both Aphria One and Aphria Double Diamond. https://drive.google.com/file/d/1PVqulah2GYJUgKJA7cbLxJ4jwpCKv3m8/view?usp=sharing
This 20-page powerpoint slide deck in PDF form outlines our quick takeaways from last week’s cannabis news. This includes Aphria’s fiscal Q2/19 results, the takeaway from Constellation Brands earnings release, Peter Thiel’s announcement and Friday proving out a bull case as to why Tilray continues to trade somewhere North of 35x Price/Book Value.
Aphria released further details on the Latin America operations. The details on the release did not portray businesses worth anything close to the amount paid and played into Quintessential Capital Management arguments. No financials or even pictures were provided by Aphria. Details on the nearly 100 employees remain cloudy and at this point it would appear that Vic Neufeld will need to step down.
Long/Short equity fund Quintessential Capital issued a scathing report this morning, focused on Aphria’s international business. The three early takeaways for us are: 1) CEO Vic Neufield will likely be forced to resign or have his role at Aphria reduced. 2) International operations are essentially worth zero. This was our prior position. 3) Our prior concerns earlier this year about delays with Health Canada approvals appear to have been legitimate. Recall we raised the issue of Phase 3 expansion approvals taking longer than expected (March 12, 2018 rather than January 2018). Raising this concern with Aphria, the issue was quickly dismissed by the company as a non-issue. This report, however, […]
We have updated our full marketing presentation on Aphria. This easy to follow 18-slide pitch updates the expected per store sales change for Ontario, Canadian EBITDA expectations and assumptions on the impact of oil-based products on ASP’s. International medical sales we believe will not have a material impact over the next two fiscal years and our expectations per country are shown. Finally, we have created two tables outlining both our financial and non-financial assumptions and valuation.
Ontario’s plan to delay opening up brick and mortar cannabis stores until April 1, 2019 increases our fiscal 2020 revenue and EBITDA estimates. We had previously thought that the 80 store target by July of 2019 versus an estimated 200+ stores in Alberta by that time was telling as to what was likely to be an under-penetrated Ontario market. The Ontario Cannabis Store acting as a wholesaler to private businesses while running online sales beginning on October 17th, 2018 we believe will keep average wholesale prices under $6 per gram. We will be updating our financial forecast in an upcoming note. Important […]
We have completed a holistic overview of Canada’s recreational cannabis market. Based primarily on data from Colorado as well as taking into account capacity increases from Canada’s lowest-cost producer, we have a materially different assumption on future market prices and demand. Attached is our overview of the industry. All graphs used are sourced from either the State of Colorado, BDS, Provincial government press releases or BDS Analytics.
On Wednesday February 21, Aphria posted on its social media accounts that their phase 3 expansion was complete. The next step before the greenhouse can have marijuana plants move in is receiving Health Canada approval. A timely phase 3 expansion is key to meeting EBITDA expectations over the next year – Phase 3 is expected to more than triple Aphria’s production capacity (excluding their Broken Coast acquisition) from 9,000 KG/year to 30,000 KG/year. This is well above retail and wholesale medical demand for Aphria’s marijuana products, which are selling at a 5,000 KG/year run rate. In other words this expansion is […]
Updated on February 7th. Written by Robin Manson-Hing with Contributions from Saif Shah. We have received exclusive photos on Aphria’s phase 3 and 4, 700,000 square foot expansion from Saif Shah. These pictures along with those coming out on Aphria’s phase 3 expansion have caused us to raise questions on a topic that does not appear to be widely discussed. Recall based on Aphria’s September press release it was said that phase 3 would be completed by September 2017 (12 months following a September 2016 press release) and that Health Canada approval would take place by January 2018 (four months following the expansion’s completion). As […]
Aphria is set to release their fiscal Q2/18 results (quarter ending November 30) around the middle of January. As is normally the case, there is not expected to be a press release of results or an earnings conference call. Stock Prices Has Been Going Up After Quarterly Reports – Aphria has seen its share price increase 14% and 2% the day after reporting its last two quarterly results. Fiscal Q4 (quarter ended May 2017) saw cash costs reach a Canadian industry low of $0.79 per gram by competitors’ definition ($1.11 by Aphria’s definition) and a 181% Q/Q increase in EBITDA […]
With Aphria (APH-TSX) closing at $8.53 on Friday, the stock price is now roughly 5% above our fundamental target of $8.13. We began this stock call as a buy at $5.74 after the July 14th close. The Federal sin tax of $1 or 10% came in at the low end of the 10% to 15% expectations. With this positive news out of the way, there remain fewer macro catalysts to move the stock higher. Recall legalization begins on July 1, 2018 and all provinces are expected to be ready by this time. Important Disclosures and Disclaimer This publication is produced by Perspectec Inc. This publication and […]
With contributions from Saif Shah Medical marijuana licensed producer Aphria (APH.TO) reported in-line revenue and EBITDA. Below are APH’s fiscal Q1/18 results versus our expectations. Source: Company reports and Perspectec An unrealized gain with upside – Results were very much in-line with our expectations up until “unrealized gain on long-term investments”. Aphria has used the $200 million+ investor funds raised not only for it’s Leamington greenhouse expansion but also for a number of <20% ownership positions in public (Level 1) and private (Level 3) marijuana companies. APH’s long-term investments would have decreased in value the last three months if it wasn’t for their […]
Aphria is expected to report its fiscal Q1/18 (three months ended August 31st 2017) results tomorrow. Below are our expectations for results: Q1/18 Forecast Kilograms sold should continue to track (and maybe beat) revenue growth After a low cash cost per gram of $1.11 last quarter, we believe Aphria will be able to maintain and see no major movement in cash costs We expect a slow down in EBITDA from last quarter but still enough to make it Aphria’s eighth consecutive quarter of positive EBITDA We believe investors should continue buying Aphria’s shares up until about $8. We are maintaining our […]
Aphria is in the midst of building out its largest and likely last greenhouse expansion (Part IV). Their 700,000 square-foot expansion will increase cannabis production capacity from 30,000 KG a year to 100,000 KGs when it is finished by mid-2018. Talking with insiders at the company, material technological advancements are poised to have a meaningful impact to the future operational costs and profits of Aphria. Among the changes the additions to includes: 1) The co-generation of heat and power (CHP) in the new building, 2) Power supply from the proposed Windsor-Essex upgraded grid, and potential sell back 3) Switching to LED lightning (provided […]