Embark Health continues to deliver for MMJ Group

By Trevor Hoey. Published at Jun 1, 2020, in Small Caps

MMJ Group Holdings Limited (ASX:MMJ; OTC:MMJJF) continues to demonstrate its ability to successfully invest in early stage unlisted enterprises in the cannabis sector with the prospect of realising potential gains.

The group specialises in managing a portfolio of investments along the cannabis value-chain, and today it’s largest investee, unlisted Embark Health Inc informed the market that is production facility in Delta, British Columbia had been commissioned, and the production of bubble hash, rosin and dry sift had commenced.

This is a credible achievement given that Embark only secured its Health Canada processing licence less than three months ago.

MMJ was a foundation investor in Embark Health in July 2018, and it now has a shareholding of approximately 12.7% with a book value of C$2.40 per share.

The group also has warrants that provide the option for it to acquire a further 3.3 million shares in Embark.

MMJ has generated a total return of two times its investment with a current book value of $13.2 million.

It is worth noting that MMJ is total portfolio including cash was valued at $44 million as at 30 April, 2020, representing net tangible asset (NTA) value per share before tax of 19.3 cents.

Based on these metrics, the company’s share price would need to appreciate some 60% in order to trade in line with its NTA.

Embark ideally positioned to cash in on the value chain

Embark is an emerging leader in cannabis extraction, with a focus on reaping the full potential of the cannabis plant through scientific approaches to extraction and the production of quality products to enhance everyday life.

Management’s mandate is to pursue the best production processes throughout product innovation and development, manufacturing and take to market lifecycles.

Not only is this where the value lies, but the result is unparalleled commercial and consumer extraction products.

Embark’s key milestones have included the benchmarking and optimisation of cannabis biomass processing time to ensure the most effective length of treatment to optimise outputs with high purity while maintaining cost-effectiveness.

Test runs have been conducted to ensure equipment is effectively configured for the ideal balance of consistent throughput and purity.

Embark has also correlated biomass quality with extraction output, determining the most appropriate means to achieve the purity and unique properties that will provide it with a competitive edge.

With these operational factors in place, the company is developing a revenue pipeline consisting of tolling, contract manufacturing and the brokering of orders.

Dual brands to target recreational market

Embark continues to move forward with plans for two brands set to launch in the recreational market.

The group is launching a Value brand and an Approachable Premium brand with each comprising a selection of solventless products within their respective portfolios.

The brand product offerings and price points will address the demand for 2.0 solventless products within the different market segments.

In order to fulfil the increase in customer orders, production pipeline and achieve around the clock operations, Embark has begun the ramp up of its people strategy and is actively seeking additional personnel.

Management also said that it was pleased with Health Canada’s policy announcement on May 12, 2020 regarding ‘’Operational Changes to Cannabis Program Requirements’’, which permits licensed producers to expand on existing facilities without requesting lengthy amendments to their licence.

On this note, Chief Executive Dr. Luc C. Duchesne said, “This amendment is significant and allows Embark to accelerate the remaining facility retrofits to add production modalities in our licensed facility in Delta, BC.”

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