Mackie maintains Buy recommendation, $4.50 price target on Valens GroWorks

Analysts at Mackie Research maintained their Buy recommendation on Valens GroWorks Corp (CSE:VGW) with a target price of $4.50 per share.

The analysts noted that Valens entered into a multi-year services agreement this week with privately-held Sundial Growers for cannabis extraction services. Under the deal’s terms, Sundial will ship bulk quantities of dried cannabis to Valens over an initial three-year term.

READ: Valens wins multi-year cannabis extraction deal with Sundial Growers

Valens will, in turn, process the cannabis into resin and other cannabis-oil derivative products. Valens will also conduct research & development for Sundial to support their product development efforts using cannabis oil derivative products.

“Over the past couple of months Valens has signed four multi-year cannabis extraction agreements with Canopy Growth, Sundial Growers, Harvest One and GTEC Holdings,” wrote Mackie Research analysts Greg McLeish and Nicola McFadden.

“These recent announcements underpin our EBITDA forecasts through F2020 and our thesis remains intact,” they added.

The analysts said Valens has approximately $30 million in net cash.

“This strong cash position will allow the company to increase extraction capacity at its Kelowna facility, strategically increase its domestic geographic presence and address potential working capital requirements,” wrote the analysts.

“We are maintaining our BUY recommendation on Valens with a target price of $4.50 per share,” they added.

Valens recently inked a multi-year extraction agreement to process Canopy Growth Corp’s (NYSE:CGC) (TSX:WEED) whole flower and trim into high-grade cannabis resin.

Based in Kelowna, British Columbia, Valens is a cannabis company that focuses on extraction, distillation and cannabinoid purification as well as quality testing.

Through its three wholly-owned subsidiaries, Valens Agritech, Valens Farms and Valens Labs Ltd, the company is involved in customized cannabis extraction, cultivation, and testing. The company is currently capable of processing more than 78,000 kg of cannabis per year.

Contact Uttara Choudhury at [email protected]

Follow her on Twitter: @UttaraProactive 

Story by ProactiveInvestors