Hygrovest Ltd (ASX:HGV) has grown its net present value (NPV) by 38% over the last four months ending October 31, lifting its share price 8% in the same period on the back of positive growth in the Australian and Canadian cannabis investment markets.
The company’s profit after tax during the same period was A$7.3 million and net asset value grew from A$24 million to A$32 million.
Per share that translated to a 30% increase, from 10.6 cents to 13.8 cents, even as Hygrovest’s share price grew 8% from 6.4 cents to 6.9 cents.
HGV’s two main investments – Weed Me and Southern Cannabis Holdings – were particularly strong drivers of growth.
The company has valued its investment in Weed Me at an enterprise value to net revenue multiple of 3.2 times historical net revenue, based on a basket of comparable Canadian cannabis companies.
“The 28% growth in pre-tax NAV in October 2022 was primarily due to the impact of the valuation multiple applied to Weed Me from the increase in the listed Canadian cannabis securities,” the company wrote in a portfolio report.
Hygrovest calculated the valuation multiple has increased from 1.9 to 3.2 during this latest financial period, again based on a collection of listed Canadian cannabis companies.
White House calls for cannabis reform
The Canadian cannabis market’s growth has been largely attributed to US President Biden’s official White House statement, which called for comprehensive cannabis reform, particularly in relation to the removal of criminal records and the down scheduling of the substance from its current Schedule 1 designation.
While the regulatory process to action these reforms is uncertain in timing and execution, the sentiment has nonetheless given the investment market an optimistic attitude toward the sector.
Hygrovest continues to work toward diversifying its portfolio, intending to capture a broader range of investment opportunities in sectors such as healthcare, the digital economy and natural resources.
The company’s existing cannabis investments will still account for 72% of its investment portfolio, however, a strategy that has been reinforced by the cannabis market’s recent rallies in Canada and Australia.