PI Financial - ICCLabs Coverage, ICC International Cannabis Corp.

PI Financial - ICCLabs Coverage

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Capitalizing on the Global Trend of Medicinal Cannabis

  •  International exposure. ICC International Cannabis Corp. is a fully licensed cannabis producer in Uruguay. Its license allows for domestic sales of recreational cannabis and the export of medicinal cannabis.
  • Superior regulatory environment. Uruguay was the first country to legalize recreational cannabis use. In addition, the government has licensed ICC to grow high-CBD hemp for the export of concentrated CBD products. While many countries are allowing the use of medicinal cannabis very few are authorizing domestic production.
  • Significant addressable CBD market. Located in South America, ICC is well positioned to supply medical cannabis to South / Latin America. Brazil, Mexico, Colombia and Argentina have all taken steps to legalize medical cannabis and more are expected to follow suit. Over 625M people reside in South / Latin America.
  • Low cost of production. We believe ICC can produce cannabis and extracts at less than half the cost of the lowest cost producers in Canada. ICC benefits from favourable regulations, outdoor growing, less restrictions on hemp, ample sunlight and a low-cost skilled workforce.
  • One of only two licenses in Uruguay. The government of Uruguay has only awarded two production licenses in Uruguay. Not only is ICC the dominant producer for the domestic market but the Company is the only producer for medicinal cannabis exports.
  • Initial supply agreement signed. ICC has entered into a presales agreement with a Mexican trade partner. This initial arrangement outlines the sale of CBD oil which will be distributed through a large network of Mexican pharmacies.
  • FORECAST/OUTLOOK: We expect the majority of future sales will be through global exports of medicinal cannabis. We expect additional supply agreements with international partners to pre-sell its CBD products that will be available in early 2018. We are forecasting sales of $0.6M, $15.6M, $88.9M, and $166.5M for FY17, FY18, FY19, and FY20 (December year-end). Our EBITDA forecast for the same period is ($4.8M), ($5.4M), $23.0M and $45.4M.
  • VALUATION/RECOMMENDATION: We believe ICC International Cannabis Corp. represents a pure play on the growing acceptance of medicinal cannabis globally and believe it has a significant advantage within South / Latin America.
  • We are initiating coverage of ICC International Cannabis Corp. (V-ICC) with a BUY rating (Risk rating: SPECULATIVE) with a 12-month target of $2.75. This represents an EV/EBITDA multiple of 5.3x based on our FY20 EBITDA.
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