A $22 million cash adjustment and a delayed Florida VidaCann deal for Planet 13 Holdings Inc. PLNH are key points in Pablo Zuanic's latest report from Zuanic & Associates.
Despite these setbacks, the company's management remained optimistic, backed by expansions in Las Vegas and Illinois, and a significant foothold in the Florida market.
The report noted Planet 13 Holdings' stock trades at a discount compared to the sector average, offering a unique investment opportunity.
“PLNH still has one the strongest balance sheets in the space,” Zuanic wrote. “The stock has gone from trading in line with the MSO group average to a discount (1.6x proforma vs. 2.2x for the MSO average; almost a 30% discount), and it is down 10% since 11/17/23 vs. +36% for the MSOS ETF in that time.”
Florida Expansion And Market Dynamics
The VidaCann acquisition is a pivotal move for Planet 13 Holdings, with the deal expected to close by April 1, 2024. This strategic expansion into Florida positions Planet 13 Holdings to capitalize on the state's burgeoning market, especially with the potential legalization of recreational cannabis.
The VidaCann franchise, with 26 stores, ranks ninth in Florida's cannabis market but underperforms in sales compared to the state average. Despite not expanding its number of stores in 2023, VidaCann's sales increased due to higher flower and extract volumes, estimating a rise to $41 million in annual sales or roughly $1.58 million per store.
This is still below the Florida average, as state-wide revenue per store was higher. VidaCann's sales per store and product volumes are lower than leading competitors, indicating room for growth and improvement in performance.
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Nevada Operations And Growth Prospects
Despite challenging market conditions in Nevada, Planet 13 Holdings is outperforming many competitors, maintaining its market share through innovative additions to its Las Vegas superstore.
Moreover, the company is poised for further growth through potential acquisitions and market stabilization.
Illinois And California Ventures
Planet 13 Holdings is also expanding its footprint in Illinois and California, with new stores showing promising early results. The Illinois store is expected to generate significant sales, benefiting from limited competition and a strategic location.
Meanwhile, the California operation is stabilizing, with increased marketing efforts to drive traffic.
Financial Restatement And Outlook
The report, addressing a financial restatement due to a $22 million misappropriation of funds, highlights Planet 13 Holdings' stock resilience.
Despite these challenges, Zuanic remains Overweight on Planet 13 Holdings, noting the company's strong position to fund its expansion plans with one of the industry's most robust balance sheets.
“Our updated estimates reflect the $22Mn in cash lost (as per the company’s recent disclosure and financial restatement, although we note $3.4Mn of the $22Mn have been recovered as part of a settlement with Casa Verde), and our expectation for the VidaCann deal in FL to close by 4/1/24 vs. 1/1/24 before,” Zuanic wrote.
“We will stay Overweight (despite the questions raised regarding cash stewardship) as we do not think the valuation captures the various growth initiatives and FL rec optionality (only Trulieve TCNNF and Cansortium Inc CNTMF have more FL exposure than PLNH with >30% proforma),” concluded Zuanic.
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