US cannabis play iAnthus Capital Holdings (iAnthus Capital Holdings Stock Quote, Chart, News CSE:IAN) may be trending lower but the stock is still a “Buy” says Beacon Securities analyst Russell Stanley.

In a note to clients on Tuesday, Stanley reiterated his price target of C$12.00, representing a projected return of 264 per cent at the time of publication.

IAnthus, with core operations in Florida and Arizona, announced on Tuesday that it had entered into a non-binding term sheet for a secured term loan of up to $50 million. The loan, expected to come in two tranches of $25 million, has each tranche maturing in three years and paying 9.0 per cent per annum. Management says that the proceeds will go towards the company’s continued buildout in Florida, Nevada, New Jersey and New York. (All figures in US dollars unless where noted otherwise.)

“Reducing our cost of capital has been one of our key goals for this year,” said Hadley Ford, CEO of iAnthus, in the accompanying press release. “We believe this is a great opportunity to add strength to our balance sheet as we continue to invest in our key expansion initiatives, along with people, systems and brands.”

Although he will hold off on rejigging his forecast and valuation until the loan’s definitive documentation arrives, Stanley is judging the overall impact of the event as a negative.

iAnthus Capital: analyst Russell Stanley reviews the company’s debt position

“With the stock trading near 52-week lows, it is possible that the market had already expected some sort of financing. We note that in late July, Harvest Health & Recreation announced entering a non-binding term sheet for a $225 million secured term loan with the same lender. These terms make IAN’s debt a little more expensive (9.0 per cent versus 8.0 per cent, a three-year term versus four years) than HARV’s,” writes Stanley.

“At first glance, this debt also looks slightly more expensive than the combined $60 million in unsecured convertible notes that IAN issued in March and May (four-year maturity, paying 8.0 per cent per annum with up to 50 per cent of that interest payable in stock over the first two years, convertible at $5.92 per share or approximately C$7.87 per share). On this basis, the terms may be viewed negatively, though we note that 3.7 million warrants (three years at $6.43 per share or C$8.55 per share) were issued with those convertibles,” he writes.

Ahead of IAN’s second quarter fiscal 2019 results expected next Tuesday, Stanley is calling for revenue and EBITDA of $21 million and negative $8 million and says that he will be looking for updates on the company’s buildout plans including potential M&A activity.

Late last month, iAnthus provided an update on its Massachusetts operations, saying that the company received on July 18 vote from the City of Worcester’s License Commission in favour of issuing IAN a licence to operate an adult-use dispensary (pending approval from the state’s Cannabis Control Commission). The company also recently installed new extraction equipment at its Holliston cultivation and processing facility, with plans to open another such facility in Fall River, Mass, in late 2019.