Week 2

Update for Cannabis Industry between November 24th and November 28th.

In the M&A Canadian space, there were no transactions that happened this week. Instead, I have found some interesting information regarding the Valuation metrics.

Currently, the average EV/Rev is around 1.1x for the US MSOs. While the EV/EBITDA is around 4x. What I find interesting is that the EV/EBITDA has been on decline since 2025 where it peaked at about 5x. 

Cannara Biotech has released their annual financial statements for 2025. Here are some key insights or take aways that I found important with some of my commentary:

Their cash position has dramatically increased from 6.6M in 2024 to 14.4M now. I believe that it is reasonable amount of cash to currently have as their Working capital for the year is of about 48M- but this does not mean that they should not payout dividends. 

Sales went from 110M to about 148M this year, which underlines their strong yearly growth. Currently, and my best guess, is that Ontario Cannabis Store represents about 46% of their total revenues; SQDC or BCLDB represent 28% of total income; International sales represent about 5%. This leaves us with 21% to be distributed to other provinces, which means that it relies heavily on 2 provinces. If there would be a strike that could happen (like in BC), Cannara and most other companies would be in big trouble as  their Cash Conversion Cycle is extremely long (Over 200 days), for Cannara it is about 250 days. 

Cannara has Selling, Marketing and promotion expenses a bit under 10M for this year, which represent about 7% of their total sales (there was almost no change between the years). I believe that it is on a lower end of the average expense compared to other companies in the space. 

Looking into their CFs, we can see that most of cash comes from the operating activities as per usual. It is important to note that they have slightly accelerated their financial repayments to lower the credit risk.
What I find interesting is that their CAPEX have decreased drastically (30% decrease YoY) which may mean two things: They have finished or about to finish major investment projects or they are underinvesting in their equipment or facilities for their long-term growth.

Organigram Global is receiving direct support from New Brunswick with a non-repayable contribution of up to 2M$. In a nutshell, they are getting this support as Organigram plans on utilizing their CAPEX (of around 9.3M$) in NB facilities by upgrading their equipment. NB probably sees this as an investment given that Organigram will be paying direct excise tax to them. According to multiple sources, like opportunities NB, NB will be receiving around 424K in direct tax revenue by the end of 2026. I am not too sure if it is an accurate estimation but their facility there (Moncton) has a capacity of 85,000 kg/year. Unfortunately, they do not have a breakdown of sales per province in their financial reports or MD&A for cannabis. I am sure for a fact that Organigram has a big market share in New Brunswick compared to other companies and I am sure that it does not generate as much revenue as other provinces like Ontario or Alberta.

Also, fun fact- Nova Scotia has reported in 2024 that Cannabis was second largest account in crops that brought the most cash into the province.