AFC Gamma, Inc.

AFCG Details

AFC Gamma, Inc. (NASDAQ: AFCG) is a commercial real estate financing business that originates, structures, and underwrites senior secured loans and other forms of loans for established cannabis industry operators in jurisdictions where medical and adult-use cannabis has been authorized. To the extent permitted by relevant laws and regulations, the company's loans are secured by the loan parties' real estate and personal properties, such as licenses, equipment, and other assets. AFCG commenced trading on NASDAQ on March 19, 2021, pursuant to an IPO at an issue price of USD 19.00 per share.

Expansion and Utilization of Credit Facility: On September 13, 2021, AFCG increased its senior credit facility by USD 30 million to Devi Holdings Inc. (D/B/A Nature's Medicines), a pharmaceutical company. In addition, AFCG has also committed an additional USD 20 million under the credit facility, bringing the total amount of the facility to USD 62.5 million, with USD 10 million of the expansion syndicated to an affiliate company.

Previously, AFCG stated on August 31, 2021, that it had given a USD 23 million credit facility to BeLeaf Medical, LLC, a single-state Missouri operator, to grow and buy three Missouri cultivation sites in Lakefront, Cherokee, and Jonesburg. The facility is secured by a first-lien mortgage on BeLeaf's Jonesburg facility (once purchased) and its other commercial-security interests.

H1FY21 Results: The company reported an interest income of USD 13.43 million during H1FY21 (ended June 30, 2021). Net income for the period was USD 6.03 million. As of June 30, 2021, total original loan commitments amounted to USD 187.72 million across 14 portfolio companies. In addition, during H1FY21, AFCG increased its provision for the current expected credit loss to USD 0.71 million and the balance as of June 30, 2021, amounted to USD 1.18 million.

Key Risks: The business was founded on July 06, 2020, with just a few months of experience. As a result, it is vulnerable to the risks and uncertainties of establishing a new business, such as the possibility that it may not succeed in the long run. In addition, AFCG's loan portfolio focuses on specific property types or companies, such as cannabis, that are more prone to default and are backed by assets in a limited number of geographic regions. As a result, economic and commercial downturns in such areas or types of assets may quickly result in loan defaults, severely damaging the company's operations, financial condition, and operational performance.

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

AFCG Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: AFCG's share price has surged 9.42% in the past three months and is currently leaning towards the mid-band of the 52-week range of USD 19.75 to USD 25.05. The stock is currently trading above its 50 DMA level, and its RSI Index is at 59.95. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 20.50. Considering the uptick in the stock price, its limited operating history, and associated risks, we recommend a "Sell" rating on the stock at the current price of USD 22.54, down 0.13%, as of September 28, 2021, 11:48 AM ET.

*All forecasted figures and Industry Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.