Analysts' Ideas of the Week · 5 hours ago · Analysts' Ideas of the Week Best Performing Top...

Analysts' Ideas of the Week Best Performing Top Pick was up 30% Last Week

September 8, 2020

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Click here to view FRC’s complete list of top picks

PLEASE READ THE IMPORTANT DISCLOSURES AT THE BACK OF THIS REPORT

FRC Top Picks

The following table shows last week’s top five performers among our Top Picks,

including three junior resource companies, one technology company, and one special

situations company. The top performer, Cornerstone Capital Resources (TSXV: CGP),

was up 30.2% WoW without any company specific news. Its share price is up 262%

since we launched coverage in March 2020. In June 2020, SolGold plc (ASX: SOLG)

made an unsolicited bid to acquire CGP. Our take on the offer can be viewed here.

Top Five Performers Last Week

Overall, our portfolio (equally weighted) was up 3.4% in the past week versus the

benchmark’s (TSXV) -1.6%. As shown below, our portfolio has outperformed the TSXV

in every single time period:


https://www.researchfrc.com/website/top-pick-page/

https://www.researchfrc.com/is-solgolds-unsolicited-offer-good-enough/




Performance by Sector

Our complete list of top picks (updated weekly) can be viewed here.

Weekly Mining Commentary

The S&P 500 was down 4.1% WoW, after reporting a 2.5% gain in the prior week. Most of the key global equity indices reported losses in the past week, as shown in the chart below.

Source: FRC / Various

A stronger US$ impacted prices of four of the five mainstream commodities we

monitor. Copper was the only commodity that moved up, and reported a 1% WoW gain.

As shown below, nickel is the only commodity with a lower YoY change in price.



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As shown below, inventory levels of zinc and nickel dropped on both the LME and SHFE (Shanghai Futures Exchange), indicating rising demand. As for copper, inventory levels were down on the LME, and up on the SHFE, giving us mixed signals.






Inline with the performance of global equity indices, the valuation of both base

metal and gold producers declined marginally in the past week. The global average

EV / R (1.5x) and EV / EBITDA (8.2x) of the Diversified Metals and Mining sector are in

line with their past four-year averages, implying that the market does not expect any

further upside in base metal prices. That said, the market has a positive outlook on gold

prices as the global average EV / R (3.8x) and EV / EBITDA (11.4x) are approximately

30% higher than their four-year averages (Data Source: S&P Capital IQ).






Both Canada and the U.S. reported positive macroeconomic data in the past

week. Both countries reported a decline in unemployment rates in August. Also,

consumer sentiment in the U.S. seems to be rising.






U.S Unemployment

Canada Unemployment

U.S. Consumer Sentiment

Canada Consumer Sentiment

Another positive development is that the number of new cases of COVID-19 in the

U.S., and in most countries that we have been monitoring, are on a declining trend.

Argentina has also started to see a decline; this is very encouraging as, in the past few

weeks, we had expressed concerns regarding the rising number of cases in the country.

India is the only country (in the top 15 most affected countries) that is continuing

to experience a rising number of cases.






Source: https://www.worldometers.info/coronavirus/

Despite our improved outlook, we have not made any changes to our near-term forecasts for base metal prices. As most of government benefits and mortgage deferral programs are expiring this month in Canada, we would like to see the impact of these on consumers in October before adjusting our forecasts.

In the following section, we review companies that announced key developments in the

past week.



https://www.worldometers.info/coronavirus/




Mining / Exploration

Company

Name:

Ticker

Symbol

Current Share

Price:

FRC Fair Value

Estimate:

Date of PR:

Barrick Gold

AngloGold

Ashanti

NYSE: GOLD

NYSE: AU

US$29.46

US$28.39

US$31.71

US$48.88

Aug 31, 2020

PR Content

Selling their 80% interest in the Morila

gold mine (Mali) for US$22-27 million

cash.

FRC Opinion

Neutral – The Morila gold mine ceased

operations in Q3-2019. Currently, stockpiles

are being processed. This deal has minimal

impact on our 2020 revenue and EPS

estimates.

Company

Name:

Ticker

Symbol

Current Share

Price:

FRC Fair Value

Estimate:

Date of PR:

FPX Nickel

Corp.

TSXV: FPX $0.77 $0.62 Sept 1, 2020

PR Content Commenced field tests designed to evaluate the potential for the development of a low or zero carbon mining operation at its Baptiste project in B.C. Previous lab tests have demonstrated that the project’s tailings can absorb carbon dioxide when exposed to air. FPX expects to announce test results in the coming months.

FRC Opinion Neutral - Share price is up 114% since we initiated coverage on August 11, 2020, Baptiste holds one of the largest undeveloped nickel deposits in the world, with 5 Blbs indicated, and 0.99 Blbs inferred. An updated PEA is expected shortly. Metallurgical tests in 2019 indicated that the project’s concentrates can be suitable as direct feed for both stainless steel and EV batteries. This optionality is a significant advantage for FPX, offering them a wide range of potential off-takers.



https://www.researchfrc.com/company/barrick-gold-corporation/

https://www.researchfrc.com/company/anglogold-ashanti-limited/

https://www.researchfrc.com/company/anglogold-ashanti-limited/

https://www.researchfrc.com/company/fpx-nickel-corp/

https://www.researchfrc.com/company/fpx-nickel-corp/




Company

Name:

Ticker

Symbol

Current Share

Price:

FRC Fair Value

Estimate:

Date of PR:

Renforth

Resources Inc.

CSE: RFR $0.06 $0.12 September 8,

2020

PR Content Commenced resource expansion / infill

drilling (26 holes / 7,261 m) on its Parbec

gold project.

FRC Opinion Neutral – With the recent sale of New Alger, RFR is fully focused on Parbec. As disclosed previously, the company is completing a $3.24 million equity financing with Radisson Mining (TSXV: RDS). Upon closing, RFR will have $8.6M in cash and securities.

Company

Name:

Ticker

Symbol

Current Share

Price:

FRC Fair Value

Estimate:

Date of PR:

Latin Metals

Inc.

TSXV: LMS $0.13 $0.43 Aug 31, 2020

PR Content Acquired the Auquis copper property in Peru. It is a copper-molybdenum porphyry exploration project with several untested targets. One such target, measuring 3.5 km by 2.0 km, returned over 300 ppm copper in all stream sediment samples. LMS is planning to complete geological mapping and surface geochemistry.

FRC Opinion Positive – Latin has added two projects in Peru since the beginning of August. We are pleased to see that LMS is following through with its previously disclosed strategy to expand its portfolio in Peru. LMS’s flagship assets are the Esperanza copper-gold project in San Juan province, and the Organullo gold project in Salta province (optioned out to Yamana / TSX: YRI).



https://www.researchfrc.com/company/renforth-resources-inc/

https://www.researchfrc.com/company/renforth-resources-inc/

https://www.researchfrc.com/company/lms/

https://www.researchfrc.com/company/lms/




Special Situations and Technology

Company

Name:

Ticker

Symbol

Current Share

Price:

FRC Fair Value

Estimate:

Date of PR:

Royal Bank of

Canada

TSX: RY $96.2 $89.93 Sept 4, 2020

PR Content RBC Global Asset Management announced August mutual fund net sales of $686 million for a net increase of 1.4% in AUM.

FRC Opinion Neutral – While RBC’s asset management continues to show strength, with increasing AUM, the growth is too small to move the needle of the bank’s overall profitability. Mutual fund revenues have been around 13% of total revenue in the past two years.

Company

Name:

Ticker

Symbol

Current Share

Price:

FRC Fair Value

Estimate:

Date of PR:

CIBT Education

Group Inc.

TSX: MBA $0.68 $1.22 Sept 8, 2020

PR Content Raised US$10M (through limited partnerships) to acquire two rental buildings in Vancouver. This will bring CIBT’s portfolio to 11 projects and 16 buildings.

FRC Opinion Positive – This is an excellent follow up to the company’s recent announcement that they are evaluating options to potentially spin off the real estate business into a new entity and list it on a recognized North American stock exchange. CIBT’s share price is up 42% in the last month, despite weakness in market demand for student housing amid an increasing number of universities / colleges offering online classes. The spin-off transaction will allow management to tap into a much larger investor-base for capital to advance the real estate projects. It will also enable CIBT to monetize its investment in the subsidiary.



https://www.researchfrc.com/company/apple-inc/

https://www.researchfrc.com/company/apple-inc/

https://www.researchfrc.com/website/company/cibt-education-group-inc/

https://www.researchfrc.com/website/company/cibt-education-group-inc/




Cannabis

Company

Name:

Ticker

Symbol

Current Share

Price:

FRC Fair Value

Estimate:

Date of PR:

Indiva Limited TSXV: NDVA $0.30 $0.59 September 8,

2020

PR Content

Announced it has shipped the first batch

of WanaTM Sour Gummies, which is

expected to be in Ontario stores starting

next week. The company is currently

releasing the product in three flavors, and

is planning to add to it later this year.

FRC Opinion

Positive – We are pleased to see the

company being able to release the product

on schedule. We expect this product line to

become a significant component of Indiva’s

revenue stream, and have forecasted 2020

revenue from Wana gummies to be $2.38

million. We will release our Q2 update

report on Indiva later this week with more

details.

Weekly Cannabis Commentary

Cannabis Industry Performance

Company YTD 1-Week 1-Year

Aphria Inc. -9% -5% -33%

Aurora Cannabis Inc. -68% -18% -89%

Canopy Growth Corp. -20% -3% -42%

Cronos Group Inc. -27% -3% -53%

Tilray Inc. -64% -10% -81%

HEXO Corp. -58% -3% -85%

Organigram Holdings Inc. -51% -7% -76%

The Supreme Cannabis Co., Inc. -73% -13% -88%

AVERAGE -46% -8% -68%

MIN -73% -18% -89%

MAX -9% -3% -33%

Indexes YTD 1-Week 1-Year

HMMJ -27% -6% -58%

MCAN NM -9% NM

XCAN NM -7% NM Note: MCAN and XCAN was launched on November 18, 2019 and January 20, 2020, respectively.

Source: TMX Money, FRC



https://www.researchfrc.com/company/indiva-limited/




Over the past week, the Horizons Marijuana Life Sciences ETF (TSX: HMMJ / “HMMJ”), the Standard & Poor’s/MX International Cannabis Index (“MCAN”), and the Standard & Poor’s/TSX Cannabis Index (“XCAN”) generated a return of -6%, -9%, and -7%, respectively, with all stocks having negative returns across the board. Some of the negative reaction in the market could be traced to Canopy laying off workers for the second time in three months.

Valuation of Select Canadian LPs

The following shows the average Enterprise Value to Revenue (“EV/R”) of the Canadian

cannabis companies that we track.

Average EV/R (October 2019 – September 2020)

Company Ticker TEV/Revenue TEV/EBITDA TEV/Revenue TEV/EBITDA

Aphria Inc. TSX: APHA 3.2 33.3 3.1 32.4

Aurora Cannabis Inc. TSX: ACB 5.9 NM 5.3 NM

Canopy Growth Corp. TSX: WEED 16.9 NM 16.0 NM

Cronos Group Inc. TSX: CRON 18.7 NM 15.6 NM

Tilray Inc. NASDAQ: TLRY 6.5 NM 6.1 NM

HEXO Corp. NYSE: HEXO 6.8 NM 6.3 NM

Organigram Holdings Inc. TSX: OGI 4.5 NM 4.0 NM

The Supreme Cannabis Co., Inc. TSX: FIRE 3.9 NM 3.8 NM

AVERAGE 8.3 NM 7.5 NM

MEDIAN 6.2 NM 5.7 NM

MINIMUM 3.2 NM 3.1 NM

MAXIMUM 18.7 NM 16.0 NM

Aug 31, 2020 Sep 8, 2020

Source: S&P Capital IQ, FRC






The average EV/R, as of September 8, 2020, is 7.5x – a decrease from 8.3x a week

ago. The average EV/R, from October 7, 2019 to date, is 11.7x.

Canadian Retail Cannabis Pricing

Province (As of 2020/9/8) Average Price per Gram Average Price per Gram THC Average Price per Gram CBD # of Products Min. Price Max. Price

B.C. 10.13$ 10.23$ 8.22$ 234 3.93$ 80.29$

Ontario 9.72$ 9.87$ 8.55$ 256 4.20$ 23.98$

Quebec 9.19$ 9.13$ 9.73$ 187 4.85$ 14.55$

Alberta 11.46$ 11.47$ 11.39$ 290 3.93$ 22.00$

N.B. 9.79$ 9.90$ 8.70$ 157 3.57$ 16.28$

P.E.I. 10.25$ 10.31$ 9.50$ 136 2.20$ 23.30$

Newfoundland 10.20$ 10.17$ 10.36$ 146 4.62$ 15.40$

Yukon 14.73$ 14.81$ 13.95$ 10 12.69$ 16.15$

N.S. 10.38$ 10.43$ 9.82$ 165 5.36$ 42.85$

Nunavut 11.73$ 11.84$ 12.41$ 36 9.43$ 17.91$

Northwest Territories 11.54$ 11.54$ 3 12.08$ 13.00$

Manitoba 11.68$ 11.69$ 11.57$ 278 5.66$ 20.43$

Saskatchewan 12.82$ 12.84$ 12.46$ 124 5.66 38.50

CANADA 11.05$ 11.10$ 10.55$ Province (As of 2020/8/31) Average Price per Gram Average Price per Gram THC Average Price per Gram CBD # of Products Min. Price Max. Price

B.C. 10.16$ 10.26$ 8.22$ 232 3.93$ 80.29$

Ontario 9.78$ 9.95$ 8.55$ 254 4.20$ 23.98$

Quebec 9.19$ 9.13$ 9.73$ 187 4.85$ 14.55$

Alberta 11.47$ 11.48$ 11.30$ 294 3.93$ 22.00$

N.B. 10.07$ 10.20$ 8.90$ 153 3.57$ 16.28$

P.E.I. 10.25$ 10.31$ 9.50$ 136 2.20$ 23.30$

Newfoundland 10.17$ 10.14$ 10.36$ 145 4.62$ 15.40$

Yukon 14.73$ 14.81$ 13.95$ 10 12.69$ 16.15$

N.S. 10.38$ 10.43$ 9.82$ 165 5.36$ 42.85$

Nunavut 11.73$ 11.84$ 12.41$ 36 9.43$ 17.91$

Northwest Territories 11.54$ 11.54$ 3 12.08$ 13.00$

Manitoba 11.68$ 11.69$ 11.57$ 278 5.66$ 20.43$

Saskatchewan 12.82$ 12.84$ 12.46$ 124 5.66 38.50

CANADA 11.08$ 11.13$ 10.56$ Source: Online Provincial Cannabis Stores, FRC

The average retail price per gram decreased marginally week-over-week to $11.05.

The below chart shows Canadian retail dried cannabis flower pricing since we began

price coverage.

Canadian Retail Dried Cannabis Flower Pricing

Source: Online Provincial Cannabis Stores, FRC






Canadian Retail Cannabis Stores

As of September 8, 2020, there are 1,112 retail cannabis stores across Canada –

increasing by five over the previous week’s reported figure.

Number of Stores in Canada

Source: Provincial Websites, FRC

Aug-24-2020 Aug-31-2020 Sept-8-2020

Geographic Region Store Count Store Count Store Count Population Population / Store

Alberta 515 517 517 4,428,247 8,700

B.C. 244 247 252 5,120,184 22,656

Manitoba 30 30 30 1,379,121 45,971

N.B. 20 20 20 780,890 39,045

N.S. 12 12 12 978,274 81,523

Newfoundland 26 26 26 520,437 20,817

Northwest Territories 5 5 5 44,982 8,996

Nunavut N/A N/A N/A 39,486 N/A

Ontario 152 152 152 14,745,040 105,322

P.E.I. 4 4 4 158,717 39,679

Quebec 45 45 45 8,552,362 203,628

Saskatchewan 44 44 44 1,181,987 26,863

Yukon 5 5 5 41,293 8,259

CANADA 1,102 1,107 1,112 37,971,020 35,754

Source: Provincial Websites, FRC

All of the new stores were in B.C., the province with the second most cannabis retail

stores






Disclaimers and Disclosure The opinions expressed in this report are the true opinions of the analyst(s) about any companies and industries mentioned. Any “forward looking statements” are our best estimates and opinions based upon information that is publicly available and that we believe to be correct, but we have not independently verified with respect to truth or correctness. There is no guarantee that our forecasts will materialize. Actual results will likely vary. Companies mentioned in pages 2 and 9-12 are covered by FRC under an issuer paid model, except GOLD, AU, and RBC. FRC or companies with related management, and Analysts, may hold shares in some companies mentioned in this report including Aphria, Barrick, Indiva and RY. Distribution procedure: our reports are distributed first to our web-based subscribers on the date shown on this report then made available to delayed access users through various other channels for a limited time. To subscribe for real-time access to research, visit https://www.researchfrc.com/website/subscribe for subscription options. This report contains "forward looking" statements. Forward-looking statements regarding the Company, industry, and/or stock’s performance inherently involve risks and uncertainties that could cause actual results to differ from such forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, continued acceptance of the Company's products/services in the marketplace; acceptance in the marketplace of the Company's new product lines/services; competitive factors; new product/service introductions by others; technological changes; dependence on suppliers; systematic market risks and other risks discussed in the Company's periodic report filings, including interim reports, annual reports, and annual information forms filed with the various securities regulators. By making these forward-looking statements, Fundamental Research Corp. and the analyst/author of this report undertakes no obligation to update these statements for revisions or changes after the date of this report. Fundamental Research Corp DOES NOT MAKE ANY WARRANTIES, EXPRESSED OR IMPLIED, AS TO RESULTS TO BE OBTAINED FROM USING THIS INFORMATION AND MAKES NO EXPRESS OR IMPLIED WARRANTIES OR FITNESS FOR A PARTICULAR USE. ANYONE USING THIS REPORT ASSUMES FULL RESPONSIBILITY FOR WHATEVER RESULTS THEY OBTAIN FROM WHATEVER USE THE INFORMATION WAS PUT TO. ALWAYS TALK TO YOUR FINANCIAL ADVISOR BEFORE YOU INVEST. WHETHER A STOCK SHOULD BE INCLUDED IN A PORTFOLIO DEPENDS ON ONE’S RISK TOLERANCE, OBJECTIVES, SITUATION, RETURN ON OTHER ASSETS, ETC. ONLY YOUR INVESTMENT ADVISOR WHO KNOWS YOUR UNIQUE CIRCUMSTANCES CAN MAKE A PROPER RECOMMENDATION AS TO THE MERIT OF ANY PARTICULAR SECURITY FOR INCLUSION IN YOUR PORTFOLIO. This REPORT is solely for informative purposes and is not a solicitation or an offer to buy or sell any security. It is not intended as being a complete description of the company, industry, securities or developments referred to in the material. Any forecasts contained in this report were independently prepared unless otherwise stated, and HAVE NOT BEEN endorsed by the Management of the company which is the subject of this report. Additional information is available upon request. THIS REPORT IS COPYRIGHT. YOU MAY NOT REDISTRIBUTE THIS REPORT WITHOUT OUR PERMISSION. Please give proper credit, including citing Fundamental Research Corp and/or the analyst, when quoting information from this report. The information contained in this report is intended to be viewed only in jurisdictions where it may be legally viewed and is not intended for use by any person or entity in any jurisdiction where such use would be contrary to local regulations or which would require any registration requirement within such jurisdiction.



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Analysts' Ideas of the Week · 5 hours ago · Analysts' Ideas of the Week Best Performing Top...

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