Canadian CANNAINVESTOR Magazine April / May 2018 | Page 130

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Canwe Growers Valuation
Canwe Growers Facility SQ-FT
50,000
EV / SQ-FT
$
1,409
Canwe Growers EV
$
70,450,000
Alliance ' s Stake (%)
5 %
Alliance ' s Stake Value
$
3,522,500
Private Investment Discount
35 %
Alliance ' s Adjusted Stake Value
$
2,609,259
Outstanding Payments
$
200,000
Alliance ' s Stake EV $ 2,809,259
Shares ( dil .)
66,826,906
Fair Value Per Share Impact
$
0.04
Source : FRC
Discounted Cash Flow Valuation Our revised DCF valuation on Alliance ’ s shares is $ 0.88 per share .
DCF Model 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E Terminal
EBIT ( 1-tax )
$
-714,680
$
1,929,521
$
5,892,285
$
9,002,705
$
13,297,804
$
12,663,581
$
15,111,976
$
17,560,847
$
19,189,654
Depreciation
$
-
$
174,000
$
729,450
$
1,219,793
$
1,175,799
$
1,194,206
$
1,211,911
$
1,228,973
$
1,245,447
Investment in WC
$
-72,925
$
-1,099,808
$
-2,257,875
$
-1,856,250
$
-1,785,000
$
-148,750
$
-981,750
$
-981,750
$
-654,500
CFO
$
-787,605
$
1,003,713
$
4,363,860
$
8,366,247
$
12,688,604
$
13,709,036
$
15,342,137
$
17,808,070
$
19,780,602
CAPEX
$
-3,480,000
$
-11,283,000
$
-10,536,300
$
-339,930
$
-1,543,923
$
-1,548,315
$
-1,553,147
$
-1,558,462
$
-1,564,308
FCF
$
-4,267,605
$
-10,279,287
$
-6,172,440
$
8,026,317
$
11,144,681
$
12,160,721
$
13,788,990
$
16,249,609
$
18,216,294
$
18,762,783
PV
$
-3,754,435
$
-7,863,673
$
-4,106,024
$
4,642,834
$
5,605,787
$
5,319,005
$
5,244,520
$
5,374,256
$
5,238,870
$
44,966,967
Discount Rate
15 %
Terminal Growth Rate
3 %
Total PV
$
60,668,106
Cash - Debt + Canwe Value
$
2,718,236
Equity Value
$
63,386,343
Shares O / S ( dil )
72,002,330
Fair Value
$
0.88
Source : FRC
We are lowering the discount rate used in our analysis from 30 % to 15 %. This is based on the company ’ s considerable development regarding the cannabis botany centre as well the company ’ s acquisition of Biocannatech .
Risks
We are revising our fair value estimate to $ 0.88 per share . We believe that the company is exposed to the following risks ( list is non-exhaustive ):
� Lacks track record and has yet to achieve revenues .
� Lack of ACMPR license . Cannabis production cannot begin without a Health Canada license .
� Significant uncertainty regarding the timing of the cannabis botany centre project . Timing dependent on financing .
� Significant uncertainty regarding the timing of cannabis production from Biotech Canna . Timing dependent on financing .
� Uncertainty in the regulatory outlook for cannabis .
� Access to capital and share dilution .
� Liquidity risk .
We maintain our risk rating of 5 ( Highly Speculative ).
�2018 Fundamental Research Corp . “ 10 + Years of Bringing Undiscovered Investment Opportunities to the Forefront ” www . researchfrc . com PLEASE READ THE IMPORTANT DISCLOSURES AT THE BACK OF THIS REPORT

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