Canaccord Genuity (TSX:CF, LSE:CF) has reiterated a 'Speculative Buy' rating and US$8.00 price target on TPCO Holding Corp, aka The Parent Company (OTCQX:GRAMF, NEO:GRAMU) following Monday's announced acquisition of Coastal Holding Company for a total consideration of $56.2 million.
The broker noted that Coastal was founded in Santa Barbara in 2018, with five operating stores (Santa Barbara, Pasadena, West Los Angeles, Stockton and Vallejo), two delivery depots (Santa Barbara and San Luis Obispo), and a retail store license in Concord, California., and across its network and online, Coastal serves over 1,000 customers a day.
With the anticipated 2022 closing of the transaction, The Parent Company will have a retail store and delivery network capable of reaching 80% of California’s population, it pointed out.
READ: The Parent Company acquires California cannabis retailer Coastal Holding
In a note to clients, Canaccord's analysts said: "In our view, the announced purchase of Coastal and the Oct 1st closing of an 85% equity interest in Calma dispensary in West Hollywood, demonstrate a meaningful acceleration in the execution of GRAMF’s growth strategy, roughly tripling the company’s retail store footprint in the past four months."
"With the pace of execution picking up, a large cash balance of $259.6M as of Q2, and a new CEO with CPG experience in place (Troy Datcher joined from Clorox midAugust), GRAMF appears undervalued at 0.4x 2022 EV/Sales vs 3x for the peer group," they added.
In Monday's announcement, the Parent Company pointed out that the acquisition of Coastal will grow its California retail store and delivery depot footprints to 11 and six, respectively. It said the move also positions the company as the second-largest operating retail dispensary and delivery hub in the State with an expanded reach to over 80% of California's population.
Troy Datcher, chief executive officer of The Parent Company said in a statement: "With strategically positioned locations in high-traffic, densely populated regions, Coastal enables us to significantly increase our reach to a broader potential audience of consumers with both in-person retail and delivery options. In just over 4 months, we have more than tripled our operating retail stores in California."
With the addition of Coastal, The Parent Company continues to be the leading vertically integrated California cannabis company. The company's three manufacturing facilities guarantee unparalleled access to high-quality, low-cost cannabis, while its vast wholesale distribution network of more than 450 California dispensaries service more than 80% of the state.
Contact the author at jon.hopkins@proactiveinvestors.com