Planet 13: Tourism Drag Continues, Expect A Nice Uptick In Results Beginning In Q2 (PLNHF)

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Planet 13 Holdings (OTCQX:PLNHF) reported Q4/22 results of $29.9M in revenues and $1.9M in adjusted EBITDA. Results came in below our $33M/$4.9M estimates and reflected another challenged quarter as Planet 13 continued to be disproportionately impacted by slower than anticipated tourism on Covid concerns in what is already traditionally the weakest quarter of the year for Las Vegas travel. In addition to the lower revenues, results for the quarter were also impacted by higher opex spending related in part to the build out of operations in California and Florida and the conversion to GAAP reporting. As is the case with inflated spending throughout 2021, we expect much of that to not repeat moving forward. We reduce our near-term estimates as we believe headwinds continued in Q1 as Omicron concerns kept tourist volumes down in both Las Vegas and Orange County in January and February and staffing and construction challenges hindered results further.

Management highlighted an uptick in tourist volumes in March and highlighted the return of concerts and conventions later this year as a positive sign for the business and Las Vegas in general. We believe any uptick in tourism this time will be more sustainable. We forecast a meaningful jump in results beginning in Q2 on a long-awaited return to normalcy with travel. Importantly, we note that growth in the final three quarters of ’22 is just the beginning, with 2023 estimates reflecting initial contributions from Florida expansion, a Las Vegas lounge opportunity and expanded cultivation capacity in Nevada, the possible opening of Illinois operations, and benefits from the Next Green Wave acquisition in California on both the top and bottom lines.

Our rating for Planet 13 remains Buy and our price target at $4.50. Our price target continues to reflect a premium valuation which we believe is warranted given Planet 13’s multiple opportunities for incremental growth with existing assets, the company’s clean balance sheet (no debt and >$62M in cash), and our continued view that Planet 13 is a likely takeout in the near term, given the ongoing consolidation trends in the space and the attractiveness of the company’s assets. Planet 13’s Superstore alone provides any would-be acquirer an immediate and proven top asset to leverage for scale and a platform for brand building (Superstore just did >$80M in revenues in ’21 despite Covid-related hindrances and caters to a tourist customer base whose at-home spending can still be influenced), while outside Nevada, Planet 13 has multiple state expansion opportunities that can still be built out to meet specific standards and a clean balance sheet. Meanwhile, for Planet 13, an exit in the form of taking another company’s equity would give senior management the chance to reduce execution risk and challenges particularly as related to non-Nevada expansion, while maintaining long-term upside potential on improved valuations for all in US cannabis by holding the acquiring company’s stock. We are confident that any takeout would offer significant upside from current levels noting that valuing ‘21’s deflated Superstore revenues at an EV/Sales level commensurate to the Columbia Care (OTCQX:CCHWF)/Cresco (OTCQX:CRLBF) takeout multiple reflects ~80% of Planet 13’s current enterprise value before considering incremental growth opportunities for both the Superstore and expansion markets that are set to come in the near term along with the company’s proven track record of high profitability and cash generation.

We revise our estimates and reiterate our price target

  • Revenues: Q1/22 from $38M to $25M; 2022E from $172M to $152MM; 2023E reiterated at $217M.
  • Adjusted EBITDA Q1/22 from $9.8M to $1.8M; 2022E from $53.1M to $36.2M; 2023E reiterated at $70.3M. Our $4.50 price target reflects an EV/EBITDA of 5.6x our 2022 estimate and 3.9x 2023.

FY Income Statement ($M)

2021

2022

2023

2021

Dec-21

Q1 ’22E

Mar-22

Q2 ’22E

Jun-22

Q3 ’22E

Sep-22

Q4 ’22E

Dec-22

2022E

Dec-22

Q1 ’22E

Mar-22

Q2 ’22E

Jun-22

Q3 ’22E

Sep-22

Q4 ’22E

Dec-23

2023E

Dec-23

Revenues

119 .5

25 .0

42 .0

45 .0

40 .0

152

50 .8

55 .8

58 .8

51 .8

217 .2

COGS

53.5

10.8

18.3

19.4

17.2

65.6

22.4

24.6

25.9

22.8

95.6

Gross Profit

66.0

14.3

23.7

25.7

22.8

86.4

28.4

31.2

32.9

29.0

121.6

G&A

59.9

11

11

11

11

44.0

11

11

11

11

44.0

Sales & Marketing

6.0

1.4

1.5

1.5

1.6

6.0

1.8

1.8

1.8

1.7

7.1

Depreciation

5.9

1

1

1

1

4.0

1

1

1

1

4.0

Opex

74.4

14.0

14.1

14.1

14.2

56.4

14.4

14.4

14.4

14.3

57.5

Operating Income

-7.8

0.2

9.6

11.6

8.6

30.0

14.0

16.8

18.5

14.7

64.1

Interest

0.0

0.5

0.5

0.5

0.5

2.0

0.5

0.5

0.5

0.5

2.0

Taxes

4.4

4.3

4.4

4.4

17.5

4.4

4.3

4.4

4.4

17.5

FX Translation

Net Income

-19 .5

-4 .7

4 .8

6 .7

3 .7

10 .5

9 .1

12 .0

13 .6

9 .8

44 .6

Adjusted EBITDA

16 .9

1 .8

11 .2

13 .1

10 .2

36 .2

15 .6

18 .4

20 .1

16 .3

70 .3

Gross Margin

55%

57%

57%

57%

57%

57%

56%

56%

56%

56%

56%

Adjusted EBITDA

14%

7%

27%

29%

25%

24%

31%

33%

34%

31%

32%

Revenue Growth

Y/Y

70%

5%

28%

37%

34%

27%

103%

33%

31%

30%

43%

Q/Q

-16%

68%

7%

-11%

27%

10%

5%

-12%

Adjusted EBITDA

Y/Y

112%

-66%

55%

267%

434%

114%

767%

65%

53%

60%

94%

Q/Q

-5%

521%

17%

-23%

54%

18%

9%

-19%

Source: Company Reports, Viridian Capital Estimates

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Distribution of Ratings/IB Services

IB Services in Past 12 months

Rating

Count

Percent

Count

Percent

Buy (Buy)

14

100%

0

0%

Hold (Hold)

0

0%

0

0%

Sell (Sell)

0

0%

0

0%

Not Rated (NR)

0

0%

0

0%

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