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Valens GroWorks' profitable 3Q earns Buy rating: Mackie

The extraction company's strong numbers also earned it a C$8 price target from Mackie Research Corp

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Valens’ profit of C$0.05 per share marked a big turnaround for the company

After a profitable fiscal third quarter, Valens GroWorks Corp (CVE:VGW) (OTCMKTS:VGWCF) earned itself a ‘Buy’ rating and an C$8 price target from Mackie Research Corp.

The Kelowna, BC-based extraction company posted net income of C$5.9 million during the quarter on revenue of C$16.5 million, an 87% increase over the second quarter and a 641% increase over the first quarter of 2019.

The numbers significantly beat Mackie’s expectations of C$13.3 million in revenue and C$0.01 per share.

READ: Valens Groworks earned an income of $5.9 million in fiscal 3Q

Valens’ profit of C$0.05 per share marked a big turnaround for the company from when it suffered a loss of $0.10 per share in the second quarter of 2019.

Mackie analysts Greg McLeish and Jack Keating wrote that the cannabis firm had “strong sales momentum” going into the back half of the year.

Valens processed 26,625 kg of dried cannabis and hemp biomass in 3Q 2019, a 212% increase over 2Q 2019, the analysts wrote.

“The strong sales momentum has continued and during the first 45 days of 4Q, the company has processed 13,423 kg of biomass,” wrote McLeish and Keating.

“Volumes are expected to accelerate into the back half of 4Q as the company begins to process larger white label lots for sale in 2020. White label products generate higher EBITDA margin and this should positively impact margins through our forecast periods.”

Valens recently announced that construction had begun on its recently acquired adjoining facility in Kelowna, a move that the Mackie analysts wrote would “significantly increase” the company’s footprint.

The new purpose-built facility is anticipated to be completed in the first half of 2020, bringing Valens’ extraction capacity to over 1 million kilograms per annum.

“Valens continues to experience significant demand for its services and it is accelerating its growth to ensure that it is able to meet the growing demand of its partners for both extraction and white-label product development,” wrote McLeish and Keating.

Shares of Valens lost 3% on Friday in Canada to trade at C$3.28 and 2.7% on OTC markets at US$2.51.

Contact Angela at [email protected]

Follow her on Twitter @AHarmantas


Quick facts: The Valens Company

Price: 2.65 CAD

Market: TSX
Market Cap: $338.43 m

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