MMJ Group Holdings Ltd (ASX:MMJ, OTC:MMJJF)’s portfolio companies continue to execute on their business plans and are in a better financial position than they were a year ago.
The companies have secured funding and reduced costs to the point where burn rates are no longer a primary concern.
Some portfolio companies like Embark Health have pursued M&A opportunities that will create newer stronger entities that can withstand the market trials and tribulations.
Embark Health recently announced a definitive agreement to combine with publicly listed Bevcanna Enterprises Inc. (CSE:BEV, OTCQB:BVNNF) in a C$16 million all-share deal with a further C$9 million payable on achievement of certain milestones.
Potential upside of the larger merged business
MMJ chairman Peter Wall said last month: “This proposed acquisition of Embark Health is beneficial for MMJ investors.
“It would allow us to exit our investment at its book value and retain a share in the potential upside of the larger merged BevCanna business.”
MMJ was a founding investor in Embark in 2018 and now holds 3.697 million common shares for a shareholding of about 12% in Embark.
The company was also an early investor in BevCanna in 2018, selling its investment following BevCanna’s listing on the CSE the following year.
Weed Me
During the quarter ended September 30, 2021, MMJ’s net asset value (before provision for deferred tax) decreased 3%.
This was a favourable performance compared to MMJ’s benchmark, which declined 14% over the same period.
MMJ’s portfolio companies including Weed Me have become market leaders while the sector has struggled.
After the recent acquisition of Redecan by HEXO, Weed Me is now one of the largest privately-held cannabis producers in Ontario.
J Supply
The company’s smaller investments including cannabis retailer J Supply have grown into larger and more significant portfolio holdings.
J Supply now has three corporate stores and seven licensee stores with management indicating it plans to continue growth by about one new corporate store per quarter over the next two years.
There is also significant growth planned under the licensee model under the recently acquired Northern Helm brand with its six operating stores and expansion plans (2-3 stores per quarter until 2023).
This compared to just one licensee storefront when MMJ first acquired shares in the company.
Non-cannabis investments
MMJ’s investments outside of cannabis including Vintage Wine Estates and Brainworks (privately held) also continue to make significant progress.
Brainworks is on schedule to build out its COVID testing lab and has hired several salespeople to continue winning new mandates.
Vintage Wine Estates shares continue to be stable in a volatile market environment.