A senior analyst wrote a new note. Pablo Zuanic The financial status and value of Village Farms VFFThe only cannabis company to be anointed as such by the Drug Enforcement Agency (DEA) is listed as one of 25 DPs (“designated Participants”) in the administrative hearing to reschedule cannabis from Schedule I to III.
Zuanic claims that there were temporary disruptions to sales during the second half, due to stockouts as a result of heightened demand in the first part. The disruptions should normalize in the first quarter 2025. Village Farms was able to raise prices on some SKUs despite the slowdown in overall Canadian cannabis demand.
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Global Reach And Scale
Village Farms focuses on growing their business outside of Canada. They are particularly interested in Germany, Australia, the UK, and other countries. The company plans to distribute Canadian production according to return on investment and could consider minor investments on international markets.
It will place a higher priority on its domestic cannabis business branded and international sales. It will cut back on B2B sales in the domestic market and increase output for its own branded products.
The margins for branded sales are improving to 30-40% and the margins of B2B are also increasing because prices are higher and demand is greater overseas. Zuanic stated that approximately one third of B2B domestic sales is re-exported into Germany.
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Market Share
Hifyre’s data shows that the Canadian market for recreational cannabis has improved sequentially, with an annual growth rate of 6.7%. Village Farms, on the other hand, experienced a slowdown to 1% growth year-over-year.
- Tilray was ranked 10th amongst the world’s top players TRY Decibel (-21%) DBCCF Canopy and (-23%). CGC The growth of (-21%) was a decrease. Cannara LOVFF WeedMD (+23%) also saw significant growth.
- OGI OGI (+13%), Auxly CBWTF Cronos Group, Motif (plus 10%) and (+33%) CRON Positive growth was also seen (+4%).
- Tilray, with a 9.1% share of the November cannabis market, was followed by OGI (7.0%), VFF (6.2%), Auxly (5.6%), Motif (5.3%), Cronos (5.1%) Decibel (4.7%), Cannara (4.0%), WeedMD 2.9%, and Canopy Growth 23%.
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The valuation of a property
Zuanic believes that Village Farms is undervalued as a result of the complex model it uses and its strategy for gradual growth. This, despite Village Farms’ strong performance on Canada’s cannabis market and international expansion.
The enterprise value of the company is estimated to be about US$120m. This implies a low valuation of 0.4x sales estimates, and 5.6x EBITDA.
Zuanic claims that the market does not recognize the full value of VFF assets.
Zuanic estimates that after removing the US CBD operations, Texas greenhouses and produce businesses, the value for the cannabis division is US$19.9 million. This represents a valuation of 0.1x 2025 estimated sales, and 3x EBITDA. It is significantly less than other cannabis giants like Tilray or Aurora Cannabis. ACB.