Cannabis producer Aphria's results impress broker Eight Capital

Broker Eight Capital has repeated a ‘buy’ on cannabis producer Aphria Inc (TSE:APH) after the firm made a fourth quarter earnings beat and is set for a sales expansion.

The firm posted fourth quarter and full year results to end May yesterday.

“The company sold 738 kg and kq (eq) in the quarter compared to our estimate of 646 kg and kg(eq),” said analyst Daniel Pearlstein.

“Cannabis oil sales accounted for approximately 32% of sales, up from 26% in FQ3/17. The company recorded a 7th consecutive positive adj. EBITDA quarter and an industry leading adjusted gross margin,” he noted.

Aphria recorded adjusted underlying earnings (EBITDA) of $2.8mln which was well above our estimate of $0.7mln, the broker added.

Eight Capital also noted that the group’s acquisition of Chestnut Hill Tree Farm, operators of CHT Medical, was expected to close next week.

The broker added that a strategic investment in DFMMJ Investment Ltd and subsequent exclusive management agreement between DFMMJ and Chestnut Hill was announced in May.

“Throughout 2017, DFMMJ will ramp up Chestnut’s operations, automate certain processes and establish dispensaries. Aphria has licensed greenhouse growing intellectual property to DFMMJ to expedite the improvements,” it said.

Eight Capital has a $7.50 target price on the shares, which are changing hands today, at $5.75 each.

Story by ProactiveInvestors