Village Farms International Inc.

Village Farms International Inc. (NASDAQ: VFF) is a North American vertically integrated greenhouse producer. Produce, Cannabis-Canada, Cannabis-US, and Energy are the company's segments. Tomatoes, bell peppers, and cucumbers are produced, marketed, and sold in the Produce section. Cannabis-Canada develops and distributes cannabis products to other licensed providers and provincial governments in Canada and across the world. Cannabidiol (CBD)-based health and wellness products, including ingestible, edible, and topical applications, are developed, and sold by the Cannabis-US business. The Energy company generates electricity and sells it to customers under long-term contracts.

Key Highlights and updates

• In Ontario, Alberta, and British Columbia, Pure Sunfarms remained the most popular dried flower brand.
• Pure Sunfarms' 1.1 million square foot Delta 3 cannabis production facility gained EU GMP accreditation, allowing the company to export EU GMP-certified medicinal cannabis to importers and distributors in EU GMP-required foreign markets.
• Pure Sunfarms introduced 29 new SKUs across four product categories, maintaining its position as the top-selling dried flower brand in Ontario, Alberta, and British Columbia.
• Balanced Health Botanicals (acquired in the third quarter of 2021) and Rose LifeScience (acquired in the fourth quarter of 2021) are integrating well. In the first quarter of 2022, each company expanded its product offerings:
• Balanced Health's CBDistillery brand launched its hemp extract in over 1,000 PetSmart stores across the United States through a partnership with leading pet supplement brand Zesty Paws.
• Rose launched 14 new cannabis SKUs and shipments of its own brands increased 85 percent compared to the fourth quarter of 2021.

Important financials from the Q1 FY22 results

• For Q1FY22, total revenue increased by 34% year over year to USD 70.2 million.
• Due to Inflationary Pressures on the Produce Business, the consolidated net loss for Q1FY22 was (USD 6.5 million), or (USD 0.07) per share, compared to (USD 7.4 million), or (USD 0.10) per share in Q1FY21.
• For Q1FY22, the consolidated adjusted EBITDA was negative (USD 6.1 million), compared to a positive adjusted EBITDA of USD 0.4 million in Q1FY21.
• The Canadian cannabis industry has produced positive adjusted EBITDA for the 14th quarter in a row.

Stock recommendation

VFF's stock price has corrected by 57.20% in the past six months and is currently in the middle of its 52-week range of USD 2.81 to USD 11.45.  As can be seen in the chart below, the price is currently below the short-term (50-day) SMA and long-term (200-day) SMA. The price is forming a bullish divergence on the daily chart which will be confirmed in case the price will break USD 3.50 level upwards and form a higher low on the daily chart.

Given the stock's considerable correction in the past six months, financial results, and technical analysis, we propose a "Watch" rating on the stock at its current price of USD 2.94 as of June 08, 2022, with further analysis when the price breaks USD 3.50 level upside and form a higher low on the daily chart.

One Year Technical Chart, as of June 08, 2022. Data Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary

* Entry price as of June 08, 2022.

Investors can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and the uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavorable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decisions should be made depending on the investors' appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above. 

Note 3: The report publishing date is as per the Pacific Time Zone.

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine and its related entities do not hold interests in any of the securities or other financial products covered on the Kalkine website unless those persons comply with certain safeguards, procedures, and disclosures.

Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.