Hygrovest Ltd (ASX:HGV, OTC:MMJJF) is confident of improving financial results in the next 12 months with recent investments starting to perform well and its legacy cannabis portfolio expected to benefit from positive movements in global legislation.
Legislative changes in Germany and discussions in Canada about reducing the excise tax should improve operating conditions for Hygrovest’s cannabis investments.
Germany legalised cannabis in February, a move that is also expected to increase the valuation of these legacy cannabis investments.
Hygrovest is an Australian-listed specialist investment company which concentrates on producing capital growth for shareholders over the medium term from investments in listed and unlisted equities and debt securities.
Hygrovest’s investment portfolio.
Investment report
In its monthly Investment Portfolio Report for February 2024, the company said: “February saw half-year reporting season in Australia and pleasingly all our recent investments reported well.”
Among these recent investments, no single investment is yet of sufficient size individually to warrant disclosure and Hygrovest said it would only disclose these holdings when it was in the best interest of our shareholders to do so.
The company’s net tangible asset value per share before tax on February 29, 2024, was A$0.0962, down from A$0.1102 at the end of January 2024.
Net Asset Value down
During February 2024, HGV’s Net Asset Value (before provision for deferred tax) decreased by around 13% which was primarily due to a decrease in the Enterprise Value to Net Revenue Multiple (EV/NRM) valuation multiple applied by HGV to Weed Me Inc.
That multiple is derived from the end of month market valuations of various listed Canadian companies, each of which HGV considers to be broadly comparable to Weed Me. HGV also applies a 15% discount to the derived valuation multiple to account for the fact that Weed Me is unlisted.
HGV investments
The significant investments held by Hygrovest are:
Weed Me Inc
HGV was a foundation investor in Weed Me in December 2017 and its investment totals 4.24 million shares representing around 13% of Weed Me’s issued capital. As at the end of February, HGV had ascribed to these shares a valuation of C$1.68 per share.
It also holds 460,830 warrants in Weed Me each convertible at C$2.17 with an expiry date of October 29, 2024.
Southern Cannabis Holdings (SCH)
HGV became an investor in SCH in April 2018. Its investment currently comprises 21 million shares representing approximately 18% of SCH’s issued capital.
At month end, HGV had ascribed to these shares a valuation of A$0.17 per share.
Delivra Health Brands Inc. (TSX-V:DHB) (DHB)
HGV was a foundation investor in DHB. Its investment currently comprises 55,557,994 common shares of DHB representing an approximately 18% shareholding.
Hygrovest’s investment manager is HD Capital Partners Pty Ltd, which was appointed to that role for a term of five years commencing July 1, 2023. HD is a value-oriented, fundamental bottom-up stock picker focusing on opportunities in listed small cap equities markets.