MMJ Group Holdings Ltd (ASX:MMJ, OTC:MMJJF) will include two items of Special Business in its 2021 AGM which will be held as a virtual meeting on 17 December 2021.
Broadening MMJ’s investment mandate
MMJ is proposing, subject to shareholder approval at the AGM, to broaden its existing investment mandate.
If approved, the current restriction that limits MMJ’s investments in non-cannabis assets to 25% of its total assets would be removed.
MMJ believes that there are opportunities to enhance the returns to shareholders by further diversifying its investment portfolio to include strategic investments in sectors outside of cannabis.
The company has already made significant steps over the past twelve months to diversify the portfolio through investments in the consumer branded products and healthcare sectors.
Change in name
MMJ is proposing, subject to shareholder approval at the AGM, to change its name to ‘Hygrovest Limited’.
The board has proposed the change of name on the basis that it believes the proposed name more accurately reflects the future operations of MMJ in line with the proposed broadening of MMJ’s investment mandate.
MMJ continues to outshine benchmark
MMJ’s net asset value (NAV) decreased by 7% during the five months ended 30 November 2021, which was a significantly favourable performance compared to MMJ’s benchmark, which declined 41% over the same period reflecting in large part a decline of similar magnitude in the listed Canadian cannabis sector.
Performance for the 12 months to 30 November 2021 was a gain of 4% compared to the benchmark loss of 23%.
The material underperformance of the cannabis equity market in Canada and Australia (which represents 77% of MMJ’s portfolio) since 30 June 2021 has underscored MMJ’s decision in 2020 to broaden its investment portfolio beyond cannabis.
The cannabis sector as a whole has been unable to deliver the returns expected when the recreational sector was legalised in Canada in 2018 with the incidence of production overcapacity and greater competition.
The performance of a number of MMJ’s cannabis investments have been materially adversely affected by the decline in the listed cannabis valuations – fortunately MMJ’s largest cannabis investment (34% of the portfolio), Weed Me, has generated sufficient sales growth to more than offset the decline in market valuation multiples and MMJ remains optimistic for future capital growth from its investment.