Argo Blockchain - Re-Initiation of Coverage. Conviction Buy
Paul Kettle
Align Research Broker Note -3 min read
09:06, 8th August 2019

 

 

 

 

 

 

Argo Blockchain - Re-Initiation of Coverage

 


Efficient, highly profitable and undervalued crypto miner offering a material value dislocation opportunity in the crypto space

Argo Blockchain plc is a global data centre business that provides a purpose-built and flexible platform for the mining of leading cryptocurrencies in the enterprise-scale and institutional sectors worldwide from operational centres in Quebec, Canada. Following a change of strategy earlier this year the company is now focused on mining cryptocurrency for its own book and providing an enterprise level Mining as a Service (MaaS) product.

- Strategic shift vindicated by recovery in crypto prices

In February 2019, following a fall in crypto prices, Argo made the decision to cease its previous consumer Mining as a Service (MaaS) offering and mine cryptocurrencies for its own account. Following a strong rise in the Bitcoin price since April this year, performance has beaten expectations, with £1.36 million of cryptoassets generated in July following a strong Q2.

- Investment in hardware set to more than double capacity by year-end

In July, Argo announced a major expansion of capacity to support its Bitcoin mining operations, ordering 5,000 additional, new generation Antminer S17 mining machines. Following their installation, expected in Q4, Argo’s total Bitcoin mining capacity will increase by c.129% from Q3 to 505Ph making it one of the biggest and most efficient mining platforms worldwide.

- Investors await news on partnership with HIVE Blockchain

In May 2019 Argo announced a conditional heads of terms agreement with TSX-V listed crypto miner HIVE Blockchain Technologies Ltd, to create the world's largest purpose-built business-to-business mining service provider aimed at large-scale enterprise and institutional customers. Discussions over this, and a proposed share swap agreement, are continuing.

- Yield based valuation suggests 107% upside

Our forecasts see Argo making a net profit of £4.86 million in 2019, rising to £8.59 million in 2020. We set our first target price for the shares at 14.62p, based on a 2020 dividend payout ratio of 30% and 6% yield. Additional earnings and efficacy based valuations suggest further blue-sky potential. Conviction Buy.

Table: Financial Overviev

Year to Dec

H12019

H22019

FY2019

FY2020

Revenue (£m)

2.62

11.6

14.22

27.23

Pre-tax (£m)

(0.19)

6.23

6.04

10.44

EPS (p)

(0.06)

1.72

1.65

2.92

Source: Align Research foecasts

 

CONVICTION BUY - First target 14.62p

 

Key data

Share price

7.05p

52 week high/low

13.5p/2.875p

Exchange

LSE

EPIC

ARB

Shares in issue

293.750,000

Market Cap

£20.7m

Sector

Crypto Mining

IMPORTANT: Argo Blockchain is a research client of Align Research. Align Research and a director of Align Research own shares in Argo. For full disclaimer information please refer to the last page of the full document.

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This is a marketing communication and cannot be considered independent research. Nothing in this report should be construed as advice, an offer, or the solicitation of an offer to buy or sell securities by us. As we have no knowledge of your individual situation and circumstances the investment(s) covered may not be suitable for you. You should not make any investment decision without consulting a fully qualified financial advisor.

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Disclaimer & Declaration of Interest

The information, investment views and recommendations in this article are provided for general information purposes only. Nothing in this article should be construed as a solicitation to buy or sell any financial product relating to any companies under discussion or to engage in or refrain from doing so or engaging in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the writer but no responsibility is accepted for actions based on such opinions or comments. Vox Markets may receive payment from companies mentioned for enhanced profiling or publication presence. The writer may or may not hold investments in the companies under discussion.

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