Hygrovest Ltd (ASX:HGV, OTC:MMJJF)’s net asset value (before provision for deferred tax) increased by 8% during August 2023 underpinned by its investment in Weed Me Inc, a premium craft cannabis producer in Ontario.
The improvement in HGV’s net asset value was primarily due to the increase in the enterprise value to net revenue multiple (EV/NRM) valuation multiple applied by HGV to Weed Me.
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 has also applied a 15% discount to the derived valuation multiple to account for the fact that Weed Me is unlisted.
Investors in Hygrovest have exposure to a globally diversified portfolio that seeks to produce capital growth over the medium term from investments in listed and unlisted equities and debt securities.
Weed Me is the best-performing investment in HGV’s portfolio with a book value of A$14.9 million as at August 31 2023.
Read: Hygrovest appoints new investment manager for investment portfolio
Last month, Hygrovest executed an Investment Management Agreement (IMA) with HD Capital Partners Pty Ltd to be the company's new investment manager for the next five years.
The IMA for HGV’s investment portfolio was signed with HD Capital after a comprehensive invitational tender procedure and meticulous negotiation.
This step is also seen as pivotal in diversifying HGV’s portfolio, transitioning from its existing focus on cannabis businesses to encompass a wider array of investment opportunities, predominantly in the listed securities domain.
HD prides itself on identifying undervalued, robustly managed growth companies, frequently steered by their founders, which might not yet be on the mainstream investment community's radar.
The IMA incentivises HD’s performance through remuneration that is amplified upon HD delivering material increases in HGV’s net asset value beyond its high-water mark.