Report
Richard Gill, CFA

Argo Blockchain - Update

  • Infrastructure expansion boosts results in 2020

    Numbers for the six months to 30th June 2020 reported that Argo mined 1,669 Bitcoin equivalent in the first half of its financial year, up from 306 in H1 2019 mainly due to the expansion of the mining estate. Revenues for the period were up by 280% at £11.1m, with EBITDA up 96% to £3.23m.

  • Well placed to benefit from surge in the Bitcoin price

    After falling to a low of c.$4,900 in March amidst the coronavirus inspired sell off, following a significant rally from the $10,000 level in September, the Bitcoin price has gone on to reach a three year high of c.$19,400 as we write. The Bitcoin price is the key driver of Argo’s revenues, with every $1 increase all falling through to gross margins as there are no additional direct costs incurred.

  • Infrastructure expansion adds to attractions

    Argo's total mining capacity currently stands at 16,000 machines and 645 petahash in addition to 280 Megasols of equihash mining capacity. Capacity is expected to grow significantly in February next year following a lease order for 4,500 state-of-the-art Bitmain Antminer S19 and S19 Pro miners.

  • Bitcoin rewards halving also provides opportunities

    In May this year the reward for mining Bitcoin blocks reduced from 12.5 to 6.25. Argo believes that it will be a long-term beneficiary as reduced rewards are expected to exclude less efficient miners from the market. These miners turning off their mining units, as they become unprofitable, will be favourable for efficient and larger scale miners like Argo due to an expected fall in the network’s total hash rate.

  • Valuation suggests significant upside remains despite share price rise

    We believe a multiple of 8 times earnings is a reasonable value to place on Argo shares. On our 2021 forecasts for c.2.05p of earnings, and adding in forecast cash and cryptocurrency, we arrive at a value of 21.14p per share, which we choose to adopt as our new target price. Conviction Buy.

Underlying
Argo Blockchain

Argo Blockchain PLC. Argo Blockchain PLC is a United Kingdom-based company that provides cryptocurrency mining services. The Company's mining platform enables customers to mine Ethereum and other altcoins from their own computer or mobile device. It provides a cloud-based platform, Mining as a Service (MaaS). Its MaaS platform enables users to onboard, access and manages the blockchain mining rigs and carries out cryptocurrency mining.

Provider
Align Research
Align Research

Align Research is a commissioned research company founded in November 2015 in order to provide the under-served smaller company space with high quality analysis. We have an initial focus on the natural resources sector, in which we see significant opportunities given the current once in a generation bear market, however all undervalued small caps (sub £100m) are considered by our team. Align was founded by industry professionals with decades of experience in the stock markets, headed up by highly qualified individuals from both fund management and analytical backgrounds.

Analysts
Richard Gill, CFA

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