Hygrovest Ltd (ASX:HGV, OTC:MMJJF) continued to build its cash balance in October with the receipt of C$1 million from the maturity of Weed Me convertible notes on 29 October 2023.
The company believes that the gradually increased liquidity of the underlying portfolio, and a growing cash balance, should help close the discount to NTA (net tangible assets) over time.
HGV also started buying a listed small-cap company in October.
HGV’s investment manager HD Capital Partners estimates that the small-cap company currently trades on 3-4x EV/EBITA and 5x EV/NPATA and should pay a dividend yield of ~10% in FY24, fully franked.
Improving the level of transparency
HGV’s primary objective is to close the currently very large discount to NTA that its share price trades at.
One of the ways HGV believes it can do this is by improving the level of transparency in its portfolio, allowing all shareholders to better ‘know what they own.’
In line with that view, HGV kicked things off with a brief overview of its second-largest investment, Southern Cannabis Holdings.
Working towards a liquidity event
Southern Cannabis Holdings (SCH), HGV’s second largest investment, is an Australian-based provider of products and services in the emerging therapeutics space.
Founded in 2017, SCH has grown rapidly from its first in-person clinic on George St in Sydney to now be one of the key players in the sector serving patients nationwide.
The company is founder-led, with the CEO continuing to be the largest shareholder.
The market SCH operates in continues to expand and leading industry players including SCH have shown consistent revenue and profit growth on a quarterly basis over the past 8 quarters.
HGV owns ~18% of the issued capital of SCH. It is HGV’s intention to work towards a liquidity event over the next 12 months.