iAnthus (ITHUF): An Attractive Cannabis Stock That Flies Under the Radar

iAnthus Capital (ITHUF) embodies the top themes in the cannabis sector this year. The company is a relatively unknown player outside cannabis insiders focused on the U.S. with quarterly results on the verge of hitting an inflection point. Not to mention, the stock has a future catalyst of transitioning to a major U.S. exchange as cannabis likely becomes approved on a Federal basis in the future.

Growing Up Fast

iAnthus just reported Q4 results that wouldn’t impress many investors. The company only generated $2.2 million in revenues giving the impression that the relatively unknown company should remain that way.

In reality, iAnthus is a U.S. multi-state operator (MSO) that just entered their 10^th state. The company had pro-forma revenues of $14.8 million in the quarter or an annual runrate of $60 million already. The acquisition of MPX that closed in February added revenue from their Colorado and New Mexico operations.

Due to acquisitions, iAnthus opened dispensaries in Boston, Brooklyn, Baltimore and West Palm Beach. The company has 21 dispensaries open with a footprint potential of 68 dispensaries.

The company didn’t provide a lot of details on the pro-forma results outside of revenues so investors will want to keenly focus on these numbers as 2019 results roll out.

Relative Value

The U.S. cannabis company has a market value of $1.3 billion that offers interesting relative value compared to the Canadian players highly focused on being farmers.  One big key is that iAnthus is quickly buying actual operations and quickly developing U.S. markets versus global expansion that isn’t ready for primetime yet.

iAnthus enters 2019 with access to 11 states with 121 million people and a predicted market size of $10 billion. This compares to a total Canadian population of approximately 38 million people.

Source: iAnthus Capital April presentation

In addition, most American companies aren’t going full force into the cultivation and processing part of the business. iAnthus has a current footprint of 200,000 square feet with an additional 380,000 square feet of planned expansion.

As a comparison, Aurora Cannabis (ACB) recently announced the intent to expand one facility alone from 1.2 million square feet to 1.6 million square feet. The large Canadian cannabis company has 13 additional cultivation facilities that far exceed the 580,000 square feet of iAnthus Capital.

The future will tell which plan was the right one, but iAnthus doesn’t face a scenario of having far too much supply for current demand. While the Canadian players are producing far in excess of the local demand requiring a leap of faith that global demand will absorb some of the excess production.

Takeaway

The key investor takeaway is that companies like iAnthus Capital are underappreciated by the stock market. The company is quickly growing into a large MSO in the U.S. with plenty of opportunity for expansion and additional acquisitions to expand into further states as the market opens up.