Khiron Life Sciences KHRNF Stock Forecast & Analysis

For Khiron Life Sciences, KHRNF Stock, there are two new things that are positive for this company: the country of Colombia has switched to paying 100% of medical cannabis and have made it far easier for patients to get scrips, and second: Germany cannabis legalization.  Khiron Life Sciences is poised to do very well from both of these changes.  Khiron is already the biggest player in Colombia.  And, their conversion & retention rate for new patients is providing the company with double-digit increases monthly.

As for Germany, this is one of the biggest news events in cannabis in a long time.  There are 84.2M people in Germany and cannabis legalization – as well as cannabis federal legalization in the US – will be bigger here than in any one state in the United State (California only has 39M population) as well as Canada (Only 35M population).  Plus, once Germany goes full cannabis legalization in 2022, other countries are very likely to follow.  With Khiron poised to move into Europe & UK, this first-to-market company will perform solidly.

Undervalued Marijuana Stocks: Khiron Life Sciences KHRNF Stock & Potential Acquisition

I also see a potential that Khiron Life Sciences is an acquisition target simply because US companies will want to dominate.  Any larger US cannabis MSO sitting on cash is very likely to make a move and either acquire or merge with Khiron Life Sciences.

Also, could Sundial Growers be a potential M&A company?  Sundial Growers is sitting on a pile of cash and a move into Khiron all of a sudden takes the Canadian-based company to a whole new level being the biggest Worldwide player.  Period.  But, who makes a move into Khiron is still as of yet to be determined.

Khiron Life Sciences Comparison

Khiron is still in the build-up phase and they have undertaken a considerable task of becoming a worldwide company.  That is playing poorly on the finances for now on a comparative basis.

Here are the numbers for comparing the cannabis companies on my Complete List of Top 100 Cannabis companies:

• #53 Market Cap: $33M
• #6 Revenue Growth Rate: 52%
• #22 Gross Margins: 48%
• #55 Operating Efficiencies: 156%
• #48 EBITDA/Revenue: -97.1%
• #8 Cash/Debt Ratio: 135.6%
• #40 Total Assets: $43M

The big deal, of course, is the operating costs relative to revenue.  Keep in mind, Khiron Life Sciences is trying to become a worldwide player and the infrastructure for that is costly to start.  But, Khiron Life Sciences has enough cash to weather this plus, there are many well-positioned individuals on the board of directors that could easily enable financing options.

Khiron Life Sciences Stock Financial Data

Here is a breakdown of Khiron Q3 financial data.  For a full breakdown of MariMed MRMD stock numbers, visit the KHRNF stock page KHRNF stock page.

Gross Profits

Expectations are for a doubling of revenue for Khiron Life Sciences in 2022; ~$20M in revenue. But, I think they may be able to hit about $30M.

This is the bright spot for Khiron, both revenue growth and gross margins.  Notwithstanding, there was an increase in relative product costs despite an in-kind increase in revenue.  You can see how despite increasing revenue, gross margins dropped.  This is attributed to higher costs per product and some write-offs of older product.  So, I expect that there will be a move back upwards with gross margins.

Simultaneously, Khiron is seeing double-digit growth in new patients in Colombia.  Now, with the newly enacted rules that require insurance companies to pay for medical cannabis while simultaneously eliminating red tape for patients, this will be a boon for revenue growth in Colombia.

That being said, tempering expectations for Colombia is important.  The average income for Colombians is a mere $250.00 USD monthly.  So, while there will be continued revenue increases, on a relative basis, this is small comparatively for US investors.  Still, this is a foundation for international growth and should not be wholeheartedly dismissed.  Khiron Life Sciences will be moving into Peru, Mexico, and Brazil and having the foundations for this built in and paying for itself strengthens the company’s overall position.

Operating Profits

As I mentioned, operating costs are expensive when you try and build up a company that is international.  But, with increasing revenue that will be seen as early as Q1 2022, this will go a long way towards improving the profitability of Khiron Life Sciences.

Outside of Colombia’s potential to increase revenues, if Khiron Life Sciences were to keep operating costs in check, they will see competitive numbers very quickly.

EBTIDA & Net Profits

As for profits, EBITDA is first and it is all about operating costs.  My expectation is we should see dramatically improved operating costs within the first two quarters of 2022 with Khiron Life Sciences.  This will be driven by Colombia.  Then, building into Germany after Germany’s cannabis legalization in 2022 this will really accelerate getting to EBITDA profitability.

The eventuality is net earnings profitability.  For now, Khiron is burning some cash but, I do not see this as a problem as they have access to cash and financing without the likelihood of needing to raise more cash.

Cash On Hand

In the section just below, you can see that Khiron Life Sciences has a lot of cash relative to debt simply because they do not have a lot of debt.  They have sufficient cash relative to their position and given the future potential of minimizing EBITDA losses, the need for more cash in the future will diminish.

Still, getting to net earnings profitability is a step that will need to occur soon.  Otherwise, the debt situation will change.

Total Equity

Assets over debt show that total equity is solid for a company that has yet to become profitable.  If Khiron Life Sciences can turn that corner and get to profitability and start to increase its asset base in order to expand revenue potential then, those assets will power KHRNF stock upwards.

Khiron Life Sciences KHRNF Stock Activity

All cannabis stocks have been taking a hit.  Recently, and likely in concert with the Colombian news announcement, KHRNF stock has been moving higher:

As you can see, KHRNF stock has seen a bit of a bid.  The broader market is selling due to interest rates likely going higher and NASDAQ is taking a hit.  But, this is short term.  We have seen this before with the infamous Taper Tantrum after the 2009 bond buying of the federal reserve.  However, the eventuality was that bond prices normalized and so did economic growth.  And, that will be the same thing that plays out here as the economy adjusts to higher inflation.  Still, there may be some movements lower in other stocks.

So, I am looking for some choppiness in the markets with the eventuality that the cannabis stocks will prevail.  The thing is, NASDAQ stocks were pushed to razor-thin yields.  Now, those that are getting out of any NASDAQ stock may be searching for somewhere new to invest.  So, cannabis stocks may start showing up on radar screens because of their ultra-low valuations relative to earnings.  This could bring in new buyers and push out the short sellers.

Khiron Life Sciences KHRNF Stock Short Interest

KHNRF has not seen a lot of the short selling that other stocks have seen, as the daily volume percentages show below:

Over time, we will see a normalization of cannabis stocks with short interest.  For now, it is a profitable trade.  But, the market will not ignore profits forever.  Also, as better-performing cannabis stocks trade up to bigger exchanges, the short sellers will lose their playground while bigger US players will buy in to low-valued stocks.

Is Khiron Life Sciences KHRNF Stock a Good Investment?

There are a lot of things that I like about Khiron & KHRNF stock.  First, Khiron is an international growth story.  True, they are extended and have yet to achieve profitability over the short term.  But, the winds are changing owed to the Colombia rule change for insurance providers.  Khiron Life Sciences will be able to obtain subscriptions more easily and the insurance companies are required to pay for medical cannabis.  Because of that, I see a lot of opportunities there for Khiron Life Sciences.  And, Khiron Life Sciences will be expanding throughout Latin America, and having a solid foundation in Colombia is an excellent start.

Then, there is Germany.  I will say this a million times, if necessary: Germany is a very, very big deal.

Given the potential of Colombia and Germany, I can see Khiron Life Sciences as a potential acquisition in a major M&A move by a big player sitting on a lot of cash.  Because of that, an investor in Khiron Life Sciences will likely see their shares acquired with premium attached.

My Khiron Life Sciences KHRNF Stock Prediction

My goal for the first five months is to put together Discounted Cash Flow statements on all of the stocks I follow.  There is not enough information at this time to start a DCF on Khiron but, I will revisit this likely within two quarters.