- New report cites new management, very good customer ratings and record revenue in initiating CHAL coverage
- Chalice Brands acquisition of Homegrown Oregon also noted
- CHAL’s consistent increase in financial numbers key to BUY rating as well
A recent Fundamental Research Corp. report has initiated coverage of Chalice Brands (CSE: CHAL) (OTCQB: CHALF)
with a BUY rating and a fair value estimate of C$2.46 (https://cnw.fm/i4AD6
). CHAL closed at C$1.37 on June 8, 2021. Chalice is a leader in retail, marketing and craft cultivation supported by fully integrated processing and distribution.
“New management has demonstrated their ability by significantly growing the company’s revenue and margins in 2020,” the Fundamental Research Corp. report stated. “Another testimonial for the team is that all of their stores have very good customer ratings. We are expecting record revenue in 2021, driven by organic growth and the recent acquisition. We are also expecting a bump in valuations of U.S. cannabis players as the sector moves closer to federal legalization.”
As a basis for its BUY rating, the report noted the management overhaul, which includes key team members from Fortune 25 companies and brings experiences from companies such as Microsoft (NASDAQ: MSFT)
, Kraft Foods (NASDAQ: KHC)
, Dell (NYSE: DELL)
, Merrill Lynch and PepsiCo (NASDAQ: PEP)
to Chalice. The report also cited the company’s seven retail stores in Oregon, which accounted for 90% of the company’s 2020 revenues.
In addition, “the company recently announced it acquired a five-store retail chain, ‘Homegrown Oregon,’ valued at US$9.75M,” the report observed. “Homegrown had $2.7M in revenue and $364K in adjusted EBITDA for the quarter ended March 31, 2021, per management. The implied EV/R of the transaction is 0.9x vs the peer group average of 4x.”
The report also pointed to CHAL’s 2020 revenues, which were $22 million, a 39% year-over-year increase through organic growth, as well as the fact that its Q4 2020 numbers noted positive EBITDA. “In Q1 2021, revenue increased 18% YoY to $5.5M,” the report continued. “EBITDA was positive in Q1 2021 as well. In 2021, CHAL raised C$13.75M through private placements.”
Finally, the report noted that both the Oregon and California cannabis market saw record sales in 2020, with Oregon reporting $1.1 billion in sales and California posting $4.4 billion in sales, a year-over-year increase of 38% and 57% respectively. “U.S.-based cannabis stocks are currently trading at a discount over their Canadian peers,” the report stated. “We expect this trend to change with federal legalization in the U.S. and anticipate CHAL to directly benefit. We are expecting record revenue for CHAL in 2021. Management is targeting to capture 5% of the Oregon retail cannabis market, which we believe is a feasible target.”
Chalice Brands is a premier consumer-driven cannabis company specializing in production, processing, wholesale, distribution and retail, with seven dispensaries in Portland, Oregon. The Company is committed to developing a dynamic portfolio built around the recognized brands of Chalice Farms, with a focus on health and wellness. Chalice operates nationally through Fifth and Root and has operations in Oregon and California.
For more information, visit the company’s website at www.ChaliceBrandsLtd.com
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