Alcanna Inc. – LQSIF (OTC); CLIQ (TSX)
Should you invest in Alcanna Inc. – LQSIF (OTC)?
Recommendation: See Below
Alcanna Inc. sells alcohol and cannabis in Canada. Each product is a distinct unit, has separate management structures, and their own marketing strategies and brands.
Alcanna is focused on maintaining its position as the largest private-sector retailer with 258 stores of alcohol in North America and the largest in Canada. Alcanna is also aiming to expand its Cannabis retail stores business under the brand of “Nova Cannabis”. Margin enhancement is its core priority while retaining and growing market share across North America.
Market Cap: US $113.8 mil
Enterprise value: US $420 mil
# of employees: 2,242
Secondary: USA, Europe
Major Subsidiaries: Liquor Stores Limited Partnership, Liquor Stores GP Inc., Liquor Barn Limited Partnership, Brown Jug, Inc.
Current production: Distribution focused company, does not manufacture or cultivate products
Future production: NA
Direct sales: None
Store networks: 258 Stores selling alcohol and 15 pharmacies selling cannabis products
Supply agreements: Agreement with Aurora Cannabis for cannabis distribution
Vertically integrated: No
Horizontally diversified: Yes
Outstanding shares (diluted): 22.65 mil
Revenue Ranking in the Cannabis Industry: #50
Last Three-Quarters Revenue: $569.7 mil
EPS (diluted): -0.43
CEO: James Burns
CFO: David Gordey
James Burns, CEO of Alcanna brings more than 10 years of experience in senior management positions in the restaurant and beverage industry. Alcanna’s CFO David Gordey has more than 10 years of experience in the beverage industry. There is none in senior management with experience in running and managing Cannabis business.
Alcanna is a leading liquor retail brand in its respective market. ‘Liquor Depot’ is marketed as a convenience focused brand, ‘Wine and Beyond’ is a destination/large format store brand, ‘Brown Jug’ is a convenience focused brand in Alaska, ‘Ace Liquor’ is a convenience focused store in Alberta and the Nova Cannabis brand is targeted towards its cannabis retail stores.
Current share price: US $3.39
Price to Sales: 0.20 (Tobacco industry Avg. = 5)
Price to Book: 0.54
52 week low/high: US $2.54 to $5.71
EV / Revenue: 0.73
Alcanna raised $22.4 million in nine months ending September 30, 2019, as compared to $98.2 million from the same period in the last year in 2018. The decrease in financing in 2019 is caused by the issuance of common shares in 2018 from Aurora Cannabis private placement through which Alcanna received cash proceeds of $136.9 million. Aurora Cannabis acquired 25% ownership of Alcanna.
The risks of investing in this company may be somewhat lower than many cannabis companies in that they are solely focused on retail distribution and not cultivation. Far fewer regulatory risks drive their revenue.
Alcanna is focused on maintaining its position as the largest private-sector retailer with 258 stores of alcohol in North America and the largest in Canada. Alcanna is also aiming to expand its Cannabis retail stores business under the brand of “Nova Cannabis”.
Alcanna has strong market penetration in Alberta where the local economy is struggling. Alcanna used their positioning to their advantage and opened five retail stores to sell Cannabis which returned strong sales. Alcanna has a large opportunity to be the leading retailer of cannabis in Canada.
The cannabis retail market in Canada did not perform well in recent years as there was a shortfall of supply, however, Alcanna overcame this hurdle by undergoing a strategic partnership with Aurora Cannabis. Alcanna is planning to open 25 additional stores in Ontario.
Will its stock price improve in the long term? Likely
Alcanna has increased its total debt, which includes current and long term liabilities, in the last twelve months to CA $384.7 million from CA $135.1 million to support their expansion plans. Alcanna’s current cash and short-term investment position in the last 9 months is at CA $121.2m, which they intend to invest in their business. They have sufficient current assets to meet their current liabilities in the near term. Combine this with their very low P/S and Alcanna looks like a good investment.
Aurora Cannabis showed its confidence in Alcanna by buying 25% of its shares and lent their branding to their new cannabis stores opened last year. Aurora Cannabis can buy up to 40% of its shares but it seems they will eventually buy the entire company or its cannabis retail business.
In Canada, this year’s market size of cannabis is $5 billion and it will increase up to $10 billion within the next coming 4 to 5 years. Cannabis retail businesses can prove to be great growth opportunities and they are likely to gain market share.
For these reasons, we think Alcanna, at or near its current price of $3.39 a share, can be a good investment opportunity—though as earnings decrease with sales and expenses increased then opportunity can disappear.
About Cannin: Cannabis and Hemp Investment Experts
Market analysts expect the cannabis and hemp industry will have an annual value exceeding $75 Billion in the next decade. The time to invest in cannabis and hemp stocks is now! Are you looking to buy stock in hemp companies or cannabis companies? Interested in emerging penny pot stock companies? Looking for the best Canadian pot company to invest in? Cannin is your trusted resource for information about Cannabis and Hemp stock investment opportunities. Our global team of experts evaluates emerging cannabis stock investing companies. We aggregate hundreds of hours of research and distill it down to make it easy for our investors to understand. We provide tips on the best cannabis and hemp stock investments for 2020. We provide the latest hemp investment news and analysis. Visit our site for cannabis investing news and featured companies, sign up for the free Cannin Chronicle or get a free trial of our smart cannabis and hemp stock algorithm to take the guesswork out of profiting from this exciting industry. Predict the price of cannabis and hemp stocks hours in advance with our machine learning algorithm. Is it too late to invest in marijuana stocks like Alcanna? No! This is the perfect time.
Profit from the best Cannabis and Hemp stocks – we’ll show you how at cannin.com