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small-cap

2 Speculative US Stocks to Punt on: Columbia Care & TFF Pharmaceuticals

Jun 25, 2021 | Team Kalkine
2 Speculative US Stocks to Punt on: Columbia Care & TFF Pharmaceuticals

Columbia Care Inc

Columbia Care Inc (OTC: CCHWF) is the provider of Cannabis-based health & wellness solutions.

Investment Highlights – Columbia Care Inc – Speculative Buy at USD 4.77

  • The acquisition of Medicine Man will consolidate CCHWF’s footprints in Colorado (the world’s second-largest cannabis market).
  • The recently completed acquisition of Green Leaf Medical will be immediately accretive to gross margin, Adjusted EBITDA, and cash flow from operations.
  • The Company had projected FY21 combined revenue ranging from USD 500 million to USD 530 million, an increase of more than 150% from the combined revenue of USD 197.91 million achieved during FY20.
  • From a technical standpoint, 14-day RSI (~23.33) seems favourable and support the upside potential in the stock price.

Key Risks

  • The recently completed acquisition of Green Leaf may not achieve desired synergies.
  • The cannabis industry must ensure that they are complying with all relevant regulations.
  • The challenging macroeconomic environment can impact the ability to raise funds.

Recent Developments

On 15 June 2021, the Company stated that it had entered into an agreement to acquire Medicine Man Denver for an upfront consideration of USD 42.0 million.

On 11 June 2021, CCHWF had completed the acquisition of Green Leaf Medical worth approximately USD 240 million, well ahead of the scheduled anticipated close.

Q1 FY21 Financial Highlights (for three months ended 31 March 2021, as of 17 May 2021)

 (Source: Company result)

  • CCHWF had achieved year-on-year revenue growth of around 220% and quarter-on-quarter revenue growth of about 13% during Q1 FY21.
  • The Q1 FY21 adjusted EBITDA came out to be 10% ahead of the levels achieved during the previous quarter (Q4 FY20).
  • The cash balance stood at USD 176.50 million as of 31 March 2021.

One Year Share Price Chart

 (Analysis done by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (Illustrative)

Conclusion

The acquisition of Green Leaf will consolidate the leadership presence in the states of Pennsylvania, Maryland, Ohio, and Virginia. CCHWF had reaffirmed the guidance previously provided on 16 March 2021. Moreover, the Company anticipates combined revenue ranging from USD 500 million to USD 530 million for FY21. On the profitability front, the FY21 combined adjusted EBITDA would be likely to fall between USD 95 million and USD 105 million. The stock made a 52-week low and high of USD 2.40 and USD 7.89, respectively. The next important support level on the technical chart is at USD 4.38.

Based on the decent revenue guidance, bright industry outlook and valuation method used above, we have given a "Speculative Buy" stance on Columbia Care Inc at the closing market price of USD 4.77 (as of 23 June 2021), with a lower double-digit upside potential based on a 106.44x Price/NTM Earnings per share (approx.) on FY22E earnings per share (approx.).

TFF Pharmaceuticals Inc

TFF Pharmaceuticals Inc (Nasdaq: TFFP) is a biopharmaceutical entity focused on developing on a formula based on its TFF (Thin Film Freezing) technology.

Investment Highlights – SPECULATIVE BUY at USD 10.49

  • During the first quarter of FY21, TFFP witnessed strong market interest and positive initial manufacturing data in the cannabis space with its partner, PLUS Products.
  • Moreover, the Company has filed a US patent based on the Tacrolimus Inhalation Powder trial (once-a-day dosing development), which has the capability to generate US$1 billion in sales since it can be used for major implications for heart, kidney, lung, and liver transplants.
  • From a technical standpoint, the momentum oscillator 14-day RSI (45.51) indicates a positive stance at current levels. The MACD line is trading below the centerline; however, forming a positive crossover with the signal line.
  • In the past year, TFFP’s stock price has significantly outperformed the Nasdaq Composite index by delivering approximately 82.75% return.

Key Risks

  • The operational and economic uncertainties can delay its clinical trials and its ability to generate future revenue.
  • There is a liquidity risk as the Company has been incurring losses since its inception. Moreover, it operates in a highly competitive industry with strict regulations.

Recent News

Clinical Development: TFFP announced that its Lead Monoclonal Antibody Candidate, AUG-3387, was selected for clinical development against COVID-19.

Q1 FY21 Financial Highlights (for three months ended 31 March 2021, as of 13 May 2021)

 (Source: Company website)

  • TFFP continued to make progress with clinical development programs.
  • At the end of Q1 FY21, TFFP reported nearly US$58.1 million in cash and cash equivalents.
  • During Q1 FY21, R&D expenses increased by US$5.3 million, compared to US$2.2 million in Q1 FY20.
  • For Q1 FY21, net loss stood at US$7.7 million, worsened from US$3.8 million in Q1 FY20.

Share Price Chart

 (Analysis done by Kalkine Group)

Valuation Methodology: EV/Sales Approach (FY21) (Illustrative)

Conclusion

TFFP has scheduled pivotal clinical trials for Voriconazole Inhalation Powder in H2 FY21 for the treatment of IPA (Invasive Pulmonary Aspergillosis), and a trial for Tacrolimus Inhalation Powder for Immunosuppression. The positive results from both trials can act as a significant growth catalyst for the Company. In March 2021, TFFP closed on an underwritten offering for nearly US$30,000,000 in gross proceeds, which boosted the Company's liquidity to pursue its growth opportunities. The stock made a 52-week High and Low of USD 21.14 and USD 5.38, respectively. On the technical chart, the next important support level is at USD 8.60.

Based on the progress achieved across the promising clinical developments, strategic partnerships, solid liquidity, and favourable valuation conducted above, we have given a "SPECULATIVE BUY" stance on TFF Pharmaceuticals Inc at the closing market price of USD 10.49 (as of 23 June 2021), with a lower double-digit upside potential based 61.85x EV/Sales (approx.) on FY21E Sales (approx.).

*All forecasted figures and Industry Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached or if the price closes below the support level (indicative stop-loss price).