Despite the suggested underlying earnings (EBITDA) impact of the CannWay Pharmaceuticals takeover of C$0.9million this year rising to C$3.6mln in fiscal 2017, the broker said it was sitting pat awaiting the benefits of the all-share acquisition before adjusting estimates.
“We continue to apply a 10 times 2017E EV/EBITDA multiple to our C$9.4m estimate,” Dundee analyst Aaron Salz said in a note. EV, or enterprise value, is effectively the market value of the company adjusted for debt and cash.
The not-for-profit CWP has a significant market share in the veterans market, such as strong ties to the Marijuana For Trauma (MFT) community, where Aphria stands to see earnings gains.
Aphria struck an operating agreement with CWP in mid-2015 before the takeover was announced.
The takeover deal itself augments Aphria’s relationship with veterans, one of the most coveted patient groups, and takes out the “middle man” as Dundee called it, of the 2015 agreement.
Half of the 3.6 million shares are held in escrow, ensuring that the MFT community and CWP continue to be motivated in passing across new patients, and the deal ensures that for-profit Aphria can further its strategy.
Aphria shares traded one cent higher at C$1.22 on Friday.