Entering the Largest Market in Europe
With the Q1-report presented, it is clear that STENOCARE A/S (“STENOCARE” or the “Company”), has laid the groundwork for future scale-up, for instance through entering a new market, launching an IT-platform for online clinics as well as selecting a partner to produce the Company’s premium products. Sales is expected to fluctuate from quarter to quarter due to products being shipped in large quantities, why we expect stronger revenues in the coming quarters than the DKK 0.8m presented in Q1-23. With estimated net sales of DKK 60.4m by 2024, and with an applied P/S multiple of 5.5x, a potential present value per share of DKK 13.9 (21.4) is derived in a Base scenario.
- Entering the German Market
STENOCARE has obtained approval for a new product in Germany, which is by far the largest market for medical cannabis in Europe, with estimated sales of EUR 1bn by 2027, compared to EUR 2.2bn for Europe in total. Given the German markets size, this also entails more competition, where STENOCARE’s competitive advantage is expected to be that the Company’s product will be reimbursed by insurance companies, which is not the case for all products.
- Decrease in Sales – Improvement Expected Ahead
STENOCARE’s net sales during Q1-23 amounted to DKK 0.8m (0.9), a decrease of 10% compared to Q1-22. Given that sales is expected to fluctuate from quarter to quarter due to bulk deliveries and that STENOCARE delivered products to five markets in Q4-22, we do not attach great importance to this and estimates stronger sales in the coming quarters.
- Capital Injection Intensifies the Growth Focus
During June 2023, STENOCARE raised DKK 10.7m in gross proceeds through a unit rights issue which was oversubscribed. The funds will be used to further scale the core business and complete the indoor cultivation facility, something that we expected the Company to complete without further capital injections, hence, the investments needed for this appears to be higher than we estimated. However, we believe that the capital injection puts STENOCARE in a greater position to scale up sales by obtaining approvals in new markets and increase commercial efforts in current markets as well as strengthening the balance sheet, why we believe the Company is in a good position to deliver strong revenue growth going forward.
- Updated Valuation Range
With the Q1-report presented, we are repeating our forecasts in a Base and a Bull scenario, however slightly more conservative estimates are made in a Bear scenario. Moreover, we have seen a multiple contraction among peers since our latest update, which results in a lower valuation multiple for STENOCARE in all scenarios. This, together with the capital injection from the unit rights issue and directed issue for debt conversion, which entailed an increase in outstanding shares, results in an updated valuation range in all scenarios.
Management & Board of Directors
All analyses of companies from 2020 onwards are rated based on a new rating system - Value Driver, Historical Profitability and Management & Board ranges from 1 to 10, where 10 is the highest rating. The risk profile ranges from 1 to 10, where 10 is to be considered the highest risk. Stock analyses of companies published before 2020 have been rated based on a different model.