PharmaCielo could add “significant growth” through M&A, GMP says

Cantech Letter, by Jason Maclean, June 8, 2019

Cannabis company PharmaCielo (TSXV:PCLO) has just announced its intent to acquire CBD products company Creso Pharma, a deal which would offer a number of strategic benefits for PCLO, says analyst Robert Fagan of GMP Securities. In an update to clients on Friday, Fagan reiterated his “Buy” recommendation and target price of C$12.00 for PCLO.

PharmaCielo, … announced on Thursday the intended acquisition of Creso Pharma, an Australian medicinal cannabis company that carries out research, development and production of CBD products for humans and pets and owns a Canadian licensed producer, Mernova Medical. … Fagan says that the acquisition would open up new distribution channels for PCLO and that PCLO could boost Creso’s margins by about 50% by replacing their wholesale CBD purchases with internal production. The analyst also sees accelerated penetration through PCLO’s existing distribution channels through integrating Creso’s existing brands in Mexico and Italy, where demand is more focused on finished products.

“Strategic M&A activity was not previously a tenet of our investment thesis for PCLO. However, in light of the Creso acquisition announcement, this suggests M&A could emerge as a more significant growth vector for the company going forward,” says Fagan. … Read more.