Canaccord Raises MediPharm Price Target, Estimates

MediPharm Labs Corp. MLCPF discounted cash flow-derived per-share value is increasing, according to Canaccord Genuity. 

The Analyst

Kimberly Hedlin reiterated a Speculative Buy rating on MediPharm and raised the price target from CA$4.75 to CA$5.50.

The Thesis

Confidence surrounding MediPharm's wholesale strategy has increased, driving up product revenues, higher sales for 2019 and 2020 as well as EBITDA estimates, Hedlin said in a Monday note. 

"Our updated target reflects a 2020 EV/EBITDA multiple of 9x (unchanged) versus the Canadian mid-tier LP average of 8.4x and current trading multiple of 6.9x," the analyst said. 

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Canaccord cited additional positive activity for MediPharm, including fourth-quarter results that included $10.2 million in revenue entirely attributed to wholesale resin sales.

Further positive signs include an increased willingness on the part of producers to sell to MediPharm, Hedlin said.

"As a result, MediPharm has successfully sourced materials from a large number of high-quality producers with [favorable] working capital terms," she said. 

Canaccord credits the company for its deployment of capital toward vapes, tinctures and oil capsules and and its efforts to work with consumer packaged goods companies. Efforts to expand into cannabinoid isolation and proprietary chromatography could provide MediPharm with an additional competitive advantage, Hedlin said. 

Europe is a near-term focus for MediPharm, the analyst said, adding that the company could see "significant pricing premiums" for EU-GMP certified resin, distillate and other finished goods. EU GMP certification is slated to occur later in 2019.

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