MMJ Group Holdings Ltd (ASX:MMJ, OTC:MMJJF) has kickstarted FY2022 with 'considerable' internal funding to make further investments aimed at increasing returns from capital growth as well as holdings in several portfolio companies that have the potential to realise latent returns.
The company remains uniquely positioned in the Australian market as the only listed investment company offering the opportunity to invest in a diversified portfolio of unlisted and listed cannabis-related businesses in Australia and offshore.
MMJ highlighted in its latest annual report ending June 30 that although the past year had presented many challenges, the pandemic had not had a material financial impact on the company during the reporting period.
That applies to the internal operations of MMJ and from its observations of any operations of the companies it holds key investments in – such as its cannabis-related investments including Weed Me, Entourage Health Corp, Sequoya, Harvest One and Southern Cannabis Holdings.
Performance report
At the end of the financial year, MMJ held a diversified portfolio of minority investments representing 81% of the portfolio, with cash and a corporate tax refund (19% of the portfolio) held for future investment opportunities.
MMJ’s portfolio of cannabis-related investments sits across the value-chain with the individual businesses realising opportunities to capitalise on the growing demand for CBD and cannabis products in North America and Europe.
The continued growth in the Canadian market and expansion of the Australian medicinal cannabis market underlines MMJ’s view that its key investments are well placed to generate material investment returns over the medium term.
MMJ’s net asset value (NAV), before provision for tax, declined 5% in the year to June 30.
Over the same period, the benchmark index used for MMJ’s cannabis investments, the Alternative Harvest EFT (NYSE:MJ) returned 61%.
The company's chairman Peter Wall said it was disappointed with the portfolio’s relative performance in FY2021, which was driven by two factors.
"Firstly, the MMJ portfolio has a significant unlisted bias, with listed assets comprising only 27% of NAV - this impacted the performance relative to the benchmark and, we believe, it has been a material contributor to the sustained discount at which the MMJ’s share price trades to its NAV.
"Secondly, the benchmark index (only listed assets) was favourably impacted by IPO and merger activity during the year," he said.
New investment outside cannabis
MMJ’s first investment in a high growth industry outside of cannabis was completed in May 2021.
The US-based wine business, Vintage Wines Estates (NASDAQ:VWE), was acquired as a result of the merger with Bespoke Capital Acquisition Corp a special purpose acquisition company, in which MMJ held an investment.
Vintage Wine Estates is one of the fastest-growing US wine producers with an industry-leading direct-to-customer platform.