Trulieve Cannabis is trading at a discount, says Beacon

Florida-based Trulieve Cannabis (Trulieve Cannabis Stock Quote, Charts, News, Analysts, Financials CSE:TRUL) is still trading at a marked discount to its peers, according to Beacon Securities analyst Russell Stanley, who delivered an update to clients on Trulieve on Thursday where he reiterated a “Buy” rating on the stock.

Trulieve, a leading vertically-integrated, multi-state operator with the base of its business in Florida, announced this week the closing of two commercial loans for aggregate gross proceeds of $90 million. 

One is a $72-million five-year loan secured by a cultivation and manufacturing operation in Florida, paying 7.5 per cent per annum, while the other is a $19-million ten-year loan by its cultivation and manufacturing facility in West Virginia, paying 7.3 per cent for the first five years and then moving to a variable rate loan paying the five-year Treasury Rate plus 3.5 per cent. The proceeds of both loans are for general corporate purposes.

“We are pleased to announce our second non-dilutive financing this month,” said Trulieve CEO Kim Rivers in a press release. “This financing at attractive terms further bolsters our cash position as we enter 2023.”

Stanley said the $72-million loan was expected, while he said he views the added flexibility favourably. 

“Particularly with CAPEX expected to decline from $160 million in F2022 to $100 million in F2023 and inventory requirements expected to ease, we estimate that TRUL has $250 million+ in cash available as dry powder to fund M&A activity and/or accelerate CAPEX beyond our current F2023 outlook,” Stanley wrote.

Reporting on the Florida state of affairs regarding rec cannabis legalization, Stanley said there is indication that potentially about 312,000 valid signatures have been collected to support a bid to put the issue on the 2024 ballot, with 892,000 signatures being the required threshold. Stanley said Trulieve recently contributed $5 million to Smart & Safe Florida, an organization working to get the issue on the 2024 ballot. Trulieve has now contributed an aggregate $15 million to the organization.

With Stanley pegging Trulieve at 3.4x his 2023 Enterprise Value/Adjusted EBITDA forecast, the analyst has put TRUL to be currently trading at a 44 per cent discount to the 6.1x average among its CSE-listed US cannabis operating peers.

Stanley’s forecast has Trulieve generating full 2022 revenue and adjusted EBITDA of $1.249 billion and $415 million, respectively, and 2023 revenue and adjusted EBITDA of $1.400 billion and $487 million, respectively. (All figures in US dollars except where noted otherwise.)

With his “Buy” rating, Stanley reiterated a 12-month target of C$52 per share, which represented at press time a projected return of 472 per cent.

“Potential company-specific catalysts include further buildout updates, M&A activity and the Q4 results in early March,” he said.