The 2019 financial year was a significant year of transformation for MMJ with its investments well positioned to participate in the significant growth expected in each of their market segments.
Notably, MMJ’s largest investment - Harvest One - is in the early stages of a turnaround with the appointment of Grant Froese as chief executive in July 2018.
Since June 30, 2018 MMJ’s post-tax net tangible assets (NTA) had improved from 29 cents to 37 cents per share as at June 30, 2019.
During the year, MMJ returned 33.6% which compared favourably to its investment benchmark of 7.8%.
The company has initiated a number of strategic initiatives to address the material discount of its share price to its NTA per share value including the implementation of a share buy-back and dividend policy together with the appointment of Embark Ventures as MMJ’s asset manager.
Appointment of Embark Ventures as asset manager
Embark Ventures Inc is part of the Embark Group which includes Embark Health Inc, a company in which MMJ holds an investment of $3.7 million.
One of the principals of Embark is Michael Curtis, who is a non-executive director of MMJ and holds about 16% of Embark Ventures Inc. and 13% of Embark Health issued capital respectively.
The MMJ board believes that the company should centre its asset management resource based in Canada to better manage the existing portfolio and access new investment opportunities as it expects the majority of MMJ’s investment portfolio to be located in North America.
The terms of the appointment of Embark are a cost-effective way to ramp up MMJ’s investment operations in the medium term without adding material fixed costs to MMJ’s cost structure.
The appointment adds to MMJ’s strong market and financial discipline in identifying opportunities and bottlenecks in the cannabis value-chain and acting quickly.
On market share buyback
On June 7, 2019 MMJ announced an on-market buy-back of up to 10 million MMJ ordinary shares over the next 12 months as part of its active approach to capital management.
Understanding the portfolio and noting the discount that the company’s shares are trading to the net asset value per share of its investment portfolio, the board has determined that an on-market buyback of MMJ shares is a meaningfully value accretive use of its funds.
The buyback is from existing cash reserves and is expected to enhance shareholder returns. MMJ commenced buying its shares on June 27 2019.