Hygrovest Ltd (ASX:HGV)’s portfolio companies continue to report better-than-expected financial results since the start of FY22-23, helping HGV deliver a profit after tax (unaudited) and increase net asset value by 33%.
The main drivers of the financial performance in the year to date were the recovery in listed Australian and Canadian cannabis investment markets and the positive impact on HGV’s two main investments, Weed Me and Southern Cannabis Holdings.
Highlights for the five months that ended November 30, 2022, include:
- HGV’s net asset value (NAV) (before provision for deferred tax) increased by 33%;
- HGV’s profit after tax was $5.9 million compared to a loss of $2.9 million in the prior comparable period;
- net asset value grew from $24 million to $30 million;
- net asset value per share grew 25% from 10.5 cents to 13.1 cents;
- cash remained at $6 million as at 30 November 2022; and
- HGV share price grew 9% from 6.4 cents to 7 cents.
The recovery in listed cannabis security valuations when combined with the continued growth in the revenues of Weed Me and Southern Cannabis Holdings accounted for most of the growth in NAV during the financial period.
The following are updates from some of HGV’s investment holdings.
Weed Me Inc
Weed Me has shown multiplicative sales growth over the past 3 years.
The growth is driven by strategically increasing SKUs and continued geographic expansion, which coupled with the potential of US expansion makes HGV believe there remains a significant long-term opportunity for years of profitable sales expansion ahead.
Based on its growth profile, Weed Me has retained a global investment bank to lead a going-public transaction in H1 2023 that, assuming market conditions continue to stabilise, will be a significant liquidity event for HGV.
HGV holds 3.642 million shares representing about 14% of Weed Me’s issued capital.
Vintage Wine Estates
Vintage Wine Estates is still a strong business, and its poor stock performance was driven more by SPAC investor distaste and accounting issues that may end up being non-material in the long run, than problems in its underlying business.
The company reported its quarter in November with 40% growth in net revenue, driven by strength in all segments driving its stock ~25% higher for the month.
The attraction of the wine industry is the sales momentum with overall wine drinking, particularly in the US, growing over the past several decades.
According to industry data, wine consumption in the US has doubled per capita since 1970 with total volumes sold doubling in the past 2 decades.
Delivra Health Brands Inc
Delivra Health Brands (DHB) reported improving financial results with increased profitability towards a breakeven position in November that reiterated HGV’s belief that the company’s return from near insolvency is beginning to take hold.
Further to its growth objectives through expanding channel partners, DHB signed a sales and distribution agreement with Casey’s General Stores, a leading North American convenience store chain with over 2,400 locations.
Medio Labs Inc
HGV had invested US$1 million in Medio Labs, which offers a DNA-based universal multiplexing testing platform that can scale much higher than competing platforms bringing down the cost of each test materially lower at faster diagnostic times.
Using its own platform and next-generation sequencers, Medio Labs can target many DNA regions in parallel, all in one test run.
Medio Labs has set up an initial physical lab and begun large-scale commercial COVID testing across the US from that lab along with associated labs and has generated significant revenue.
Presently, the company is preparing to expand its testing services into other illnesses and has developed plans to launch both STD and respiratory panels shortly.
Medio Labs successfully raised additional capital in November to support these initiatives bringing in a variety of new global investors.
More importantly for HGV investors as it related to liquidity, Medio Labs has initiated plans for an ASX listing.