Buying Liberty Health Sciences (LHS-CSE) Shares is Like Owning Boardwalk in Monopoly, Building Mega Cannabis Hotels & Collecting Rent! 5 Reasons LHS-CSE Looks to be a Buy Here:
- Top Dog in Top Market
The bulk of LHS-CSE assets are in Florida. With a population of +20MM, this state is set to be one of the largest cannabis markets in the world - larger than both the Colorado Market and the entire Canadian cannabis market with strictly medicinal cannabis (~$1.6B). Liberty Health is positioned as the #1 cultivator with a 300,000+ square foot greenhouse and production facility and 400+ acres which provides plenty of room for potential expansion.
They are a top 3 dispensary operator in the state of Florida with 8 dispensaries, growing to 14 over the next 30-45 days, which would give them a 20% share of all Florida dispensaries. Currently their patient base represents ~9.3% of all active patients in the state which will grow as the new dispensaries open. Further upside could come from their investment in a vertical license in Massachusetts as well as dispensary & processing licenses in Ohio – a joint venture with the Schottenstein Group (behind the iconic brands American Eagle & DSW) with its first retail location expected to open March/19.
- Balance Sheet Loaded
We love cash and LHS-CSE has a lot of it! Their balance sheet is locked and loaded being cashed up with $19MM CAD at the most recent reporting date. The company tells us they are fully funded to positive cash flow!
- Cash Flow Machine Set to Ramp
LHS-CSE revenue has seen some impressive growth – from C$100,000 in Q3/2018 to C$3.2M in Q3/2019. The completion of the 360 Campus facility located in Gainesville, Florida, in Spring/19, will result in Liberty having the capacity to produce almost 15,000 kg/year which could generate revenues of +C$250MM/year at current pricing according to Canaccord Genuity’s Research Analyst, Matt Bottomley.
- Owned & Lead by Experienced Company Builder & Value Creator
At the helm of LHS-CSE is George Scorsis, CEO who is a company builder. He was the former President of Red Bull Canada and was instrumental as the company grew to $150M in revenue under his leadership. More recently in the cannabis industry, George was the former President of Mettrum Health Corp, which was acquired in Q1 of 2017 by Canopy Growth Corp. for $430M.
- Shares are Liquid & Set for a Rebound
Liquidity is key! One of LHS-CSE greatest strengths is the volume trading. LHS-CSE continues trading strongly throughout January/19 averaging 1.42MM for the month with an average of 1.64MM since February/18. There is no cheap stock coming out like most other U.S. cannabis deals. Further, one of the largest shareholders is a deep pocketed Canadian billionaire family the Serruya’s with strong consumer retail experience. They built the top global brand Yogen Fruz - rated as one of the top 500 franchises for over 20 years globally! The stock is down ~30% since the December 2018– it is time for LHS-CSE to rebound!
To affirm – Canaccord Genuity’s analyst Matt Bottomley stated a target price of C$2.00 in his January 29, 2019 report. The stock is currently trading at C$1.06 (February 6th, 2019)
In conclusion, if Cannabis is like a board game of Monopoly – having a Florida license is equivalent to owning the lucrative Boardwalk property. And buying LHS-CSE shares are like owning multiple massive hotels on it…and collecting rent!
Sources: Liberty Health Sciences Corporate Presentation December 2018 Canaccord Research Report, LHS-V FQ3/19 Update, Matt Bottomley, January 2018 S & P Global Market Intelligence, A Division of S & P Global Inc, Capital IQ February 2019