MMJ’s Canadian cannabis investment Weed Me attracts new capital
MMJ Group Holdings Limited (ASX:MMJ), a company that specialises in managing a portfolio of investments along the cannabis value-chain, advised on Tuesday that the privately owned Canadian cannabis business, Weed Me Inc. had completed a C$2.5 million capital raising.
MMJ Group has been an investor in Weed Me since December 2017 and it represents one of the largest investments within the company’s cannabis and hemp portfolio.
MMJ has a comprehensive and diversified interest in the cannabis and hemp industry as it owns a portfolio of minority investments and aims to invest across the full range of emerging cannabis-related sectors including healthcare, technology, infrastructure, logistics, processing, cultivation, equipment and retail.
As we will discuss later, the value of the company’s net tangible assets represents a 150% premium to the group’s current trading range, suggesting there is scope for significant share price upside, particularly if positive sentiment towards the sector returns.
Established in 2016, Weed Me is a licensed producer of cannabis with indoor growing facilities in Ontario, and it holds cultivation, processing and sales licenses under the Cannabis Act from Health Canada.
MMJ non-executive chairman Peter Wall highlighted the significance of Weed Me’s ability to attract funding in the face of negative sentiment towards the sector over the last 12 months.
Wall said, “We congratulate the management of Weed Me in securing funding in challenging market conditions and believe that it reflects the quality of its business plan and its substantial cultivation assets.“
‘’We are committed to working closely with Weed Me to deliver superior returns.”
MMJ not afraid to lock in gains
MMJ has a demonstrated track record of making astute investments in the industry, as well as timing the realisation of gains to the advantage of shareholders.
For example, MMJ saw MediPharm LABS’s (LABS) potential to establish itself as a leader in cannabis oils extraction, investing C$5 million in shares and warrants.
As the company experienced substantial share price growth throughout 2018, MMJ realised a return of six times capital invested.
The company’s success in achieving these results is reflected in its net tangible assets (NTA) per share as at December 31, 2019.
The NTA of 23.5 cents implies upside of 150% to this morning’s opening share price of 9.5 cents.
As the following table indicates, MMJ’s targeting of Canada appears to be a right time/right place decision.