Slow Rollout of Vaccines to Delay Economic Recovery...The rollout of vaccines has been much slower...

Analysts' Ideas of the Week Slow Rollout of Vaccines to Delay Economic Recovery

January 4, 2021

www.researchfrc.com

https://www.researchfrc.com/

©2021 Fundamental Research Corp. “17+ Years of Bringing Undiscovered Investment Opportunities to the Forefront”

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

Happy New Year! All of us at FRC wish you a healthy and successful year of investing! We look forward to continuing to assist you in your due diligence by providing unique insights and investment ideas. Please continue to follow our research, as we have several exciting initiatives planned for the year.

Since the Canadian stock markets were closed on December 28, 2020, we are not presenting WoW performance of our top picks. Our top picks were up 63.9%, on average, since initiation of coverage vs the benchmark’s -0.2%.

Performance by Sector

Source: FRC

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


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

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




Weekly Mining Commentary Despite the continued surge in COVID-19 cases, four of the seven global equity indices

we track were up WoW.

Source: FRC / Various

Except India and Russia, most of the hardest hit nations reported a surge in cases in the past week.

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



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




The rollout of vaccines has been much slower than expected. Only 1.38% of the U.S. population has received vaccinations. This compares to 0.3% for Canada, and 1.39% for the U.K. Israel leads the pack at 14%. Although Israel is a significantly smaller country with a population of under nine million, sources indicate that the country’s centralized government, and early negotiations with drug makers are driving this successful rollout.

Source: https://ourworldindata.org/

The World Health Organization’s Chief Scientist recently stated that although the approved vaccines have been tested to prevent recipients from becoming seriously sick, there is no evidence that they can prevent transmission. We believe this factor, and the slow rollout of vaccines amid rising cases, imply that restrictions are unlikely to be relaxed until there is a significant decline in new cases.

Globally, 13M vaccines were administered yesterday (Source: Ourworldindata.org). At this rate (assuming two doses per individual), we estimate it will take approximately 10 months to vaccinate 25% of the global population. We will be closely monitoring the above shown vaccine rollout data, as it will help us predict the timing of an economic recovery. Except zinc, all the mainstream metals reported gains in the past week due to a weaker US$ amid rising inflationary expectations. In the charts below, note the increase in inflationary expectations, and a corresponding decline in the US$ since March 2020.



https://ourworldindata.org/




Source: https://www.marketwatch.com/

Valuations of gold and base metals producers also increased slightly.



https://www.marketwatch.com/




Inventory levels of copper declined on the LME, but increased on the SHFE (Shanghai), and do not provide any specific insights.

As restrictions are unlikely to be relaxed until there is a decline in new cases, we expect

base metal prices to be under pressure. We expect the US$ to stabilize at current levels

as we believe the chance of another stimulus package in Q1 is low. That said, the

Biden government is likely to push for one once they take office later this month.

We expect gold prices to remain volatile in Q1. The consensus forecast for gold in 2021

is US$1,800 to US$1,900/oz. Our commodity price forecasts (unchanged) are shown

below:






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

Mining / Exploration

Company Name:

Ticker Symbol

Current Share Price:

FRC Fair Value Estimate:

Date of PR:

Cornerstone Capital Resources Inc.

TSXV: CGP $5.09 $7.44 Dec 29, 2020

PR Content After spending US$1.1M and completing its initial minimum work commitment on the Miocene project in Chile (potential for epithermal gold-silver and porphyry gold-copper deposits), Newcrest Mining (TSX: NCM) has elected to move to the next stage of exploration. Newcrest has an option to earn up to a 75% interest in the project. The next stage of exploration is only planned for later in the year due to the pandemic.

FRC Opinion Positive – We are pleased to see the company advancing its non-core assets. We continue to believe that CGP’s flagship asset (Cascabel) is an excellent acquisition target, and would not be surprised if BHP (ASX: BHP) or Newcrest / ASX: NCM (who are also significant shareholders of SolGold / LSE: SOLG) have a go at SOLG and CGP at the same time. A Pre-feasibility Study (PFS) on

the project is ongoing.



https://www.researchfrc.com/website/company/cornerstone/






Company Name:

Ticker Symbol



Date of PR:

Mammoth Resources

TSXV: MTH $0.12 $0.27 Dec 21, 2020

PR Content Received approval from the second of two communities (ejidos) in the region for a two-year surface access agreement to conduct exploration at MTH’s Tenoriba gold-silver project. The company had announced approval from the other ejido in November 2020.

FRC Opinion Positive – In our previous report in November 2020, we had mentioned that obtaining surface access agreements is key. MTH’s shares are up 60% since our report. The company is awaiting a permit to drill up to 139 holes. MTH also expects to announce results of a project review recently conducted by a third-party geologist with expertise in high sulphidation epithermal systems. MTH is evaluating options to fund the drill program, including a capital raise, attracting a JV partner, or merging with a cash-rich junior. Tenoriba is only partially tested, and has characteristics associated with high sulphidation epithermal precious metal systems over a large 15 sq. km area.



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

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




Special Situations

Company Name:

Ticker Symbol



Date of PR:

Elys Game Technology Corp.

NASDAQ: ELYS

$5.51 $6.78 Dec 30, 2020

PR Content Announced dual listing on the NEO exchange. The online gambling space has seen a number of M&A activities recently. U.K. based gambling and sports betting company, Entain (LSE: ENT), rejected a US$11B takeover offer by MGM (NYSE: MGM). MGM’s bid reflected an Enterprise Value to Revenue ratio of 2.6x. We believe the bid was well below the sector average (comprising select companies exposed to online betting, casinos, and gambling-related technology) of 7.3x, which justifies why Entain rejected the offer. Another significant transaction in the space was Apollo Global Management’s acquisition of Great Canadian Gaming (TSX: GC) for $2.9B, reflecting a 6x EV/Revenue multiple.

FRC Opinion Positive – ELYS is trading at 2.5x revenue. The company is currently awaiting its first sports betting license, and expects to launch operations in Q1-2021. ELYS already has arrangements with two operators in the U.S. to use its platform. We are projecting revenue of $37M in FY2020E, and $50M in FY2021E (unchanged). We expect ELYS to be an acquisition target once it is able to demonstrate the value of its platform with its first few clients.



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






Company Name:

Ticker Symbol



Date of PR:

European Residential REIT

TSX: ERE.UN $4.15 $4.91 Dec 15, 2020

PR Content Entered into an agreement to acquire a 98-unit multi-residential property (98% leased) in the Netherlands for €12.25 million, reflecting a cap rate of 4.1%. The company has made four acquisitions in H2-2020 totaling €81 million. ERES currently owns 138 multi-residential properties, consisting of 5,949 units in the Netherlands, and two office properties; one each in Germany and Belgium.

FRC Opinion Positive – We were pleased with the acquisition price, as the implied cap rate of 4.1% is 5% higher than the portfolio average cap rate of 3.9%. ERES’ trailing 12-month yield is 3.8%, which is higher than the average of both European (3.2%) and Canadian REITs (2.8%). We are projecting a dividend yield of 3.9% in the next 12 months. As with most multi-family REITs, ERES’ occupancy rates and rent collections have not been impacted by the pandemic. CAPREIT, (TSX: CAR.UN/market cap – C$9 billion/the largest residential REIT in Canada) owns approximately 66% of ERES.

Weekly Cannabis Commentary

Cannabis Industry Performance

December 31, 2020

Company YTD 1-Week 1-Year

Aphria Inc. 35% 0% 30%

Aurora Cannabis Inc. -66% -6% -68%

Canopy Growth Corp. 20% -3% 15%

Cronos Group Inc. -7% -6% -11%

Tilray Inc. -50% -5% -52%

HEXO Corp. -45% -10% -44%

Organigram Holdings Inc. -45% -6% -47%

The Supreme Cannabis Co., Inc. -76% -3% -75%

AVERAGE -29% -5% -32%

MIN -76% -10% -75%

MAX 35% 0% 30%

Indexes YTD 1-Week 1-Year

HMMJ -8% -4% -10%

MCAN 5% -4% 7%

XCAN -33% -5% NA Source: TMX Money, FRC



https://www.researchfrc.com/company/european-residential-reit/






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 returns of -4%, -4%, and -5%, respectively. There were no noteworthy developments in the industry in the past week. Valuation of Select Canadian LPs The following chart shows the average Enterprise Value to Revenue (“EV/R”) ratio of the Canadian cannabis companies we track.

Average EV/R (October 2019 – December 2020)

Dec 24, 2020 Dec 31, 2020

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

Aphria Inc. TSX: APHA 4.8 37.5 4.7 36.1

Aurora Cannabis Inc. TSX: ACB 8.0 NM 7.5 NM

Canopy Growth Corp. TSX: WEED 24.0 NM 22.7 NM

Cronos Group Inc. TSX: CRON 57.0 NM 50.1 NM

Tilray Inc. NASDAQ: TLRY 8.2 NM 7.9 NM

HEXO Corp. NYSE: HEXO 6.0 NM 5.4 NM

Organigram Holdings Inc. TSX: OGI 5.4 NM 5.0 NM

The Supreme Cannabis Co., Inc. TSX: FIRE 3.5 NM 3.4 NM

AVERAGE 14.6 NM 13.3 NM

MEDIAN 7.0 NM 6.4 NM

MINIMUM 3.5 NM 3.4 NM

MAXIMUM 57.0 NM 50.1 NM Source: S&P Capital IQ, FRC

The average EV/R, as of December 31, 2020, was 13.3x – a WoW decrease from 14.6x. The average EV/R, from October 7, 2019 to December 31, 2020, was 11.9x.






Canadian Retail Cannabis Pricing Province (As of 2021/1/4) Average Price per Gram Average Price per Gram THC Average Price per Gram CBD # of Products Min. Price Max. Price

B.C. 10.07$ 10.15$ 8.42$ 279 3.93$ 80.29$

Ontario 9.73$ 9.94$ 8.08$ 311 4.00$ 23.98$

Quebec 9.24$ 9.21$ 9.55$ 217 4.85$ 15.06$

Alberta 11.41$ 11.41$ 11.39$ 329 3.93$ 22.00$

N.B. 9.66$ 9.90$ 7.58$ 166 3.50$ 16.28$

P.E.I. 9.81$ 9.83$ 9.49$ 161 2.20$ 23.30$

Newfoundland 10.12$ 10.08$ 10.36$ 155 4.46$ 15.40$

Yukon 14.98$ 15.07$ 13.95$ 12 10.49$ 16.15$

N.S. 10.39$ 10.44$ 9.82$ 177 5.36$ 42.85$

Nunavut 11.69$ 11.80$ 12.41$ 34 5.19$ 17.91$

Northwest Territories 11.54$ 11.54$ 3 12.08$ 13.00$

Manitoba 11.52$ 11.48$ 11.62$ 323 4.90$ 20.43$

Saskatchewan 12.80$ 12.85$ 12.08$ 179 4.95 38.50

CANADA 11.00$ 11.05$ 10.40$ Province (As of 2020/12/28) Average Price per Gram Average Price per Gram THC Average Price per Gram CBD # of Products Min. Price Max. Price

B.C. 10.06$ 10.14$ 8.42$ 276 3.93$ 80.29$

Ontario 9.79$ 9.99$ 8.08$ 312 4.00$ 23.98$

Quebec 9.20$ 9.16$ 9.55$ 214 4.85$ 14.55$

Alberta 11.40$ 11.39$ 11.39$ 324 3.93$ 22.00$

N.B. 9.68$ 9.92$ 7.58$ 166 3.50$ 16.28$

P.E.I. 9.81$ 9.83$ 9.49$ 161 2.20$ 23.30$

Newfoundland 10.13$ 10.09$ 10.36$ 153 4.46$ 15.40$

Yukon 14.98$ 15.07$ 13.95$ 12 10.49$ 16.15$

N.S. 10.40$ 10.45$ 9.82$ 176 5.36$ 42.85$

Nunavut 11.69$ 11.80$ 12.41$ 34 5.19$ 17.91$

Northwest Territories 11.54$ 11.54$ 3 12.08$ 13.00$

Manitoba 11.53$ 11.50$ 11.62$ 320 4.90$ 20.43$

Saskatchewan 12.85$ 12.91$ 12.08$ 176 4.95 38.50

CANADA 11.00$ 11.06$ 10.40$ Source: Online Provincial Cannabis Stores, FRC

The average retail price per gram remained unchanged week-over-week at $11. The below chart shows Canadian retail dried cannabis flower pricing since we initiated price coverage.

Canadian Retail Dried Cannabis Flower Pricing

Source: Online Provincial Cannabis Stores, FRC

Canadian Retail Cannabis Stores As of January 4, 2021, there are 1,421 retail cannabis stores, a week-over-week increase of 37 stores across Canada; all new stores came from B.C. We note that, due






to the holidays, store count data was not updated on most provincial websites. We expect to get a more precise update next week.

Nationwide Store Count

Dec-21-2020 Dec-28-2020 Jan-4-2021

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

Alberta 547 547 547 4,428,247 8,096

B.C. 300 300 337 5,120,184 15,193

Manitoba 38 38 38 1,379,121 36,293

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

N.S. 20 20 20 978,274 48,914

Newfoundland 27 27 27 520,437 19,275

Northwest Territories 5 5 5 44,982 8,996

Nunavut n/a n/a n/a 39,486 N/A

Ontario 312 322 322 14,745,040 45,792

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

Quebec 45 46 46 8,552,362 185,921

Saskatchewan 50 50 50 1,181,987 23,640

Yukon 5 5 5 41,293 8,259

CANADA 1,373 1,384 1,421 37,971,020 26,721 Source: Provincial Websites, FRC






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. Certain companies mentioned in pages 8-11 are covered by FRC under an issuer paid model. FRC or companies with related management, and Analysts, may hold shares in some companies mentioned in this report. 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.



https://www.researchfrc.com/website/subscribe

Slow Rollout of Vaccines to Delay Economic Recovery...The rollout of vaccines has been much slower...

Documents

Transcript of Slow Rollout of Vaccines to Delay Economic Recovery...The rollout of vaccines has been much slower...