Cannabis licensed producer CannTrust Holdings (CannTrust Holdings Stock Quote, Chart, News: TSX:TRST) is trading at a big discount to its peers, says analyst Russell Stanley of Echelon Wealth Partners. In a client update on Tuesday, Stanley reiterates his Top Pick and “Speculative Buy” ratings for TRST and maintains his $18.50 target price.

Vaughan, Ontario’s CannTrust recently announced a supply agreement reached with medical cannabis producer Aleafia Health (TSXV:ALEF), under which Aleafia will recieve strains of high-quality starter genetics from CannTrust while the latter will take the right of first refusal to purchase product from Aleafia.

“This relationship is strategic for us as the Aleafia model is complementary to ours on many levels,” said CannTrust President Brad Rogers in a press release. “Aleafia’s ability to meet our rigorous production-quality standards and deliver high-quality product is key, along with CannTrust being the preferred partner in Aleafia’s clinic business. This relationship is a real win-win for both organizations.”

Stanley says that the deal is a positive for CannTrust. “This arrangement should augment TRST’s supply base and patient network, and we would not be surprised to see more arrangements like this,” the analyst states.

Stanley has slightly lowered his Q1/18 revenue and EBITDA estimates but has left his 2019 estimates unchanged. He thinks TRST will produce a topline and Adj. EBITDA in 2018 of $107.8 million and $31.3 million, respectively, and revenue and Adj. EBITDA in 2019 of $285.6 million and $110.9 million, respectively.

“At current levels, TRST trades at approximately 5.5x EV/2019E EBITDA, based on our forecast, and 10.0x EV/2019E EBITDA based on consensus,” he writes. “Relative to the peer group average of 14.0x based on consensus, TRST is trading at a 61 per cent discount based on our estimates, and a 29 per cent discount based on the consensus forecast.”

Stanley’s $18.50 target for TRST represents a projected return of 165 per cent at the time of publication.