What HD Capital Partners (formerly Capital H) appears to be...

What HD Capital Partners (formerly Capital H) appears to be doing with Hygrovest Ltd (ASX: HGV) is intriguing.

To me, it highlights that, via the Capital H Active Fund, HD Capital Partners remains committed to this strategy of finding undervalued investment entities, such as PVL, and unlocking value over time via new high-quality management teams (e.g. PVL) and a shift in strategy, plus avenues to reduce the % fixed cost base.

The HGV investments are much lower quality than the PVL investments in my opinion. But, if HD Capital Partners could manage to liquidate some of the HGV assets near NTA they could generate a fair bit of share price upside given the 50% SP/NTA discount. I think PVL's SP/NTA discount will naturally correct over time due to the quality of the portfolio but I think HGV's lower-quality portfolio will require significant effort to liquidate and close the NTA gap.

VC is a scale game. Purely a hypothetical thought, but over the long term, if HD Capital Partners could covert the unlisted HGV investments to cash (at NTA), they could merge with PVL (given HD Capital Partners is the cornerstone investor in both companies) and that would immediately reduce the fixed cost base as a percentage of NTA from ~4% to sub 2%. If PVL was granted new capital via HGV, in a non-dilutive manner, PVL could step change into scale...

Either way, given that HD Capital Partners has recently made this move to gain control of HGV (a somewhat similar investment vehicle to PVL), I suspect they remain firmly committed to unlocking value here at PVL...

Regardless of whether the above eventuates or not, I'm very comfortable with the portfolio of investments here at PVL, the high-quality management team, and the judicious use of capital. I think patience will be rewarded from these levels.