Hygrovest Ltd (ASX:MMJ) has significantly outperformed a declining Canadian cannabis market, the investment holding group’s net asset value (NAV) decreasing just 13% compared to a 46% decline in the benchmark over the same period. 

The specialist investment company is now looking to close the 61% gap in its share price to NAV ratio by working with its largest investment, Weed Me, to achieve liquidity during 2022 and realising underperforming or illiquid investments. 

Hygrovest intends to hold its Entourage Health Corp convertible debenture and recover full value (current book value is at a 55% discount to face value) while awaiting the cessation of escrow arrangements with Embark Health and Vintage Wines Estates. 

The company says funds generated from divestments will be applied as dividends to HGV shareholders and to make investments which the board considers to be prospective of higher capital growth and greater diversification. 

HGV remains well funded to continue pursuing its investment goals. The company has total assets of A$37 million, with immaterial current liabilities, comprising cash of A$4 million and a portfolio of listed equities (C$4 million), listed convertible loans (C$3 million) and unlisted loan securities (C$4 million).

Current portfolio strategy

While Hygrovest is looking to reduce its overall exposure to the underperforming Canadian cannabis market, the company’s current cannabis-based interests are outperforming the market average as the sector transitions away from large, mass producers toward smaller craft producers.

Weed Me: Weed Me’s unaudited book value stands at A$12.9 million, the best-performing investment in HGV’s portfolio. The company is in the high revenue growth stage and HGV remains optimistic for future capital growth from its investment.

HGV is working with the company to maximise exit value during the next 12 months.

Its portfolio of investments include:

➢ Harvest One: As the company’s largest shareholder, Hygrovest has a A$4.2 million investment, holding 22% in the restructured listed cannabis business.

➢ Entourage Health Corp: A$3.3 million. Hygrovest will hold convertible notes until maturity in Sept 2022 – currently at a 55% discount to face.

➢ Southern Cannabis Holdings: A$2.4 million. Diversifying its products to continue sales growth – Hygrovest is working with SCH’s management to produce a liquidity event in the next 12 months.

➢ Sequoya: A$3.2 million. Sequoya is seeking new capital. HGV is considering an extension of loan facilities.

➢ Vintage Wine Estate: A$3.1 million. Hygrovest is a small investor in VWE – the investment is in escrow until December 2022.

➢ Embark Health: A$1.5 million. Hygrovest's investment will be acquired by listed BevCanna Enterprises Inc following shareholder approval in December 2021.

➢ Brainworks Foundry Inc: A$1.4 million. It is a new investment in digital healthcare made in September 2021.

➢ Valo Therapeutics: A$1.0 million. It is a new investment in healthcare made in November 2021 and Hygrovest is supportive of the company’s targeted public listing in 2022.