Licensed cannabis producer CannTrust Holdings (TSX:TRST) has locked up supply agreements with BC, Alberta and Manitoba, an indication of strong penetration into core markets in Western Canada, says analyst Russell Stanley of Echelon Wealth Partners.

In an update to clients on Friday, Stanley reiterated his “Speculative Buy” recommendation and $21.00 target price for TRST.

Vaughan, Ontario’s CannTrust made the announcement last week, saying that together the three deals amount to more than 17,000 kg of dried cannabis annually.

“These supply agreements surpass our initial expectations and we are energized to work with – and expand – our relationships with all provinces, as we continue to sign agreements across the country. It’s a very exciting time for CannTrust and for Canada,” says Brad Rogers, President of CannTrust in a press release.

Stanley views the announcement positively, saying that the update provides clarity on TRST’s expected volumes going forward. He notes that future potential catalysts include product development news, expansion updates, international developments and improved financial results.

“TRST is now trading at approximately 5.6x EV/2019E EBITDA, based on our estimates,” says Stanley. “This represents a 65 per cent discount to the 15.9x multiple at which the broad peer group trades (based on consensus), and an 83 per cent discount to the 33.6x multiple at which the closest peers (those with $1B+ market capitalizations) trade.”

“Our 17.5x EV/2019 EBITDA multiple represents a very modest 10% premium to the group average,” he says. “We believe that TRST warrants a premium to the broad peer group, given its high value revenue mix (60 per cent of cannabis sales from oils) and balance sheet strength that fully funds expansion through 100,000kg+. The stock is now trading at a 17 per cent discount to last month’s financing price ($100M at $9/unit), making it a particularly compelling investment opportunity at current levels.”

The analyst has adjusted his revenue estimates for fiscal 2018 to make them more back end loaded but has kept his fiscal 2019 estimates as is, calling for Adj. EBITDA of $7.9 million on revenue of $87.1 million in 2018 and Adj. EBITDA of $134.9 million on a topline of $399.2 million in 2019.

Stanley’s $21.00 target represents a projected return of 180 per cent at the time of publication.