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Aphria Inc (OTCMKTS:APHQF) Is A Discount Entry Opportunity

Aphria Inc (OTCMKTS:APHQF) Is A Discount Entry Opportunity
Written by
Jim Bloom
Published on
February 8, 2018
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In the few years that Aphria Inc (OTCMKTS:APHQF) has been on the market, its value has continued on a steady upward trend. In spite of the occasional dip due to market conditions, the company remains very attractive to any investor.Revenues have been on a continued rise, cost of sales is being efficiently managed and it has a strong liquidity position that easily supports its current operations and any future plans for expansion.It is no wonder the stock has tripled in value in the last six months, jumping from $5 to a new all-time high of $17. In this piece, we provide our reader with information on the company and recent moves by its management to keep ahead.Take a look at the stock’s price action: APHQF Daily ChartCompany OverviewAphria Inc. was established in June 2011 by Cole Cacciavillani and John Cervini and has its head office in Leamington, Canada.The firm is reputed to be one of Canada's most cost-efficient producers which engages in the production, supply, and sale of medical cannabis. It also provides support services in the form of medical consultations, group therapies, and rehabilitation to veteran and first responders. Using online stores and mobile phones, the sells its products to retail consumers, while engaging in the wholesale sipping of medical marijuana plant cuttings and dried buds to approved resellers and producers. The firm truly deploys solar energy, which allows for natural growing conditions. It has also made public its dedication to delivering pharmaceutical-grade cannabis, enhanced care for patients while ensuring efficient use of resources and maximizing shareholder returns. Aphria Inc. is the first publicly licensed producer to records positive operating cash flow and also the first to record profits in successive quarters.Divestment from Liberty Health SciencesIn February 2018, the firm reported that it had gone into a purchase and sale contract to sell all of its shares in Liberty Health Sciences Inc. (roughly 26.7 million shares). Each of Simon Serruya, Michael Serruya, and Jack Serruya are acquiring eighty percent of all the shares coming from Aphria personally or using a partner. The remainder of the shares is being bought by an affiliate of Delavaco Capital. The deal contains buy/sell option for the remaining shares, which are presently under the CSE’s mandatory requirements.After this deal, Aphria still retains an ownership stake of 28.1% of the issued and outstanding shares of Liberty. Besides this, John Cervini and Vic Neufeld of Aphria will remain as part of Liberty's board of directors, with Mr. Neufeld operating as the chairman. The deal allows Liberty retain the right to continue its use of Aphria's trademarks while preserving its interest in the Aphria Know-How System.In the same month, Aphria and Liberty reported that they had gone into a conclusive agreement in consideration of the sale of Aphria's subsidiary, Aphria (Arizona) Inc. and its sole holdings being the smaller membership stake in Copperstate Farms, LLC, and Copperstate Farms Investors, LLC to Liberty for a purchase price of $20.0 million.CEO of Aphria, Vic Neufeld explained that the sale of Copperstate is an important step in the firm’s continued efforts to collaborate with the TSX and Canadian securities regulatory authorities relating to the divestiture of its direct investment in a US cannabis business. The firm is currently considering resolutions that would suffice for Aphria’s requirements while ensuring that shareholder interests are well protected. He also acknowledged the amount of work done by Copperstate to deliver high-quality medical grade cannabis to Arizona patients.An autonomous distinct committee of the board of Aphria received an opinion from Haywood Securities Inc., Aphria’s independent financial advisors, that the purchase price for the transaction is fair from a financial point of view. The Aphria Committee unanimously endorsed the approval of the transaction to the Aphria Board. Consequently, the transaction and the entering into of the contract was unanimously accepted by the Aphria Board.Similarly, an autonomous special committee of the Board of Directors of Liberty, received an opinion from Clarus Securities Inc., its own independent financial advisor, that the purchase price for the Transaction is fair from a financial point of view. The transaction was unanimously approved by the Liberty Committee to the Liberty Board. Consequently, the transaction and the entering into of the agreement were unanimously approved by the Liberty Board.Financial PerformanceThe firm’s financial statements reveal that revenues jumped significantly from $6.45 million in 2016 to $15.1 million, an improvement of over 100%. The business recorded negative operating income $1.0 million but was able to record profits of $3.2 million, due to income from other operations.The company is not very highly leveraged with only $23 million worth of long and short-term debt are on its balance sheet and current assets of $132 million. This combined with its very high liquidity would only help to boost the attractiveness of the company to investors.ConclusionIn spite of its recent dip in the last few week, proper analysis quickly reveals that the stock is very much undervalued in the market.We will be updating our subscribers as soon as we know more. For the latest updates APHQF, sign up below!Disclosure: We have no position in APHQF and have not been compensated for this article.

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