iAnthus Capital Holdings Inc. (CNSX:IAN) was recommended as a “Buy” this week when broker Beacon Securities initiated coverage of the provider of solutions for financing and managing licensed cannabis cultivators, processors and dispensaries throughout the United States.
Analysts set a 12-month share price target of C$3.75.
The broker said that US states had begun legalizing marijuana one by one. Now they are coming in batches – including four which voted in favour in the November 2016 general election.
Recreational marijuana is now legal in eight states plus the District of Columbia and medical marijuana is legal in 28 states. The federal government’s response so far has largely been to defer to the states.
“While the incoming Donald Trump administration bears close monitoring, we do not foresee a wholesale turning back the clock on this issue,” Beacon said.
As marijuana remains illegal on a Federal level, it is very difficult for entrepreneurs to gain access to traditional sources of capital.
iAnthus’ strategy is to raise capital in Canada, where there is a functioning capital market and invest funds in successful, cash flowing US marijuana businesses at very attractive multiples – or in greenfield operations in high potential markets.
iAnthus only invests in jurisdictions where marijuana is legal, and targets companies in defensible oligopoly-like positions (i.e,. market share leadership and/or limits on the number of licenses).
“iAnthus already demonstrated this strategy in the fourth quarter of 2016 when it raised capital in an oversubscribed offering and used a portion of it to invest in a flagship operation in Colorado that will provide all IP, branding and real estate to Organix, a licensed operator in Breckenridge, Colorado,” the broker said in a note.
It said iAnthus is one of just a handful of vehicles for Canadians to participate in the US legal marijuana sector, which has been cited as the country’s fastest growing industry.
The company has investments in four states – Massachusetts, Colorado, New Mexico and Vermont.
“While we expect iAnthus to execute on its extensive pipeline, consolidate businesses within states and expand into new ones, our estimates only take the company’s existing investments into account. With net cash of C$10mln in our view, iAnthus is well positioned to execute on its strategy.
!iAnthus’ shares have fallen 33% since Donald Trump nominated anti-marijuana Senator Jeff Sessions as his attorney general designate. Senator Sessions’ confirmation hearings begin on Tuesday. We believe any sign of him taking a more moderate stance could send iAnthus’ shares higher.”
Currently, iAnthus shares are at C$2.40 on Tuesday.
Story by ProactiveInvestors