Blue Star Capital - Initiation of Coverage
Blue Star Capital is an investment company with a focus on new technologies, particularly in the areas of blockchain, media and gaming. The focus is on businesses that have the capacity for substantial growth and increase in value over the medium to long-term.
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Expansion into e-sports diversifies the portfolio and provides significant growth opportunities
On 14th October 2019 Blue Star announced it had entered into an agreement to make investments of c.£150,000 each in six early stage e-sport companies operating across six different geographic markets. E-sports, which sees players compete against each other on popular video games, is a rapidly growing industry, forecast to rise in value from $1.1 billion in 2019 to $1.79 billion by 2022.
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Placings completed to finance investments, with warrant issues providing the potential for further funding
Two placings of £0.45 million each have been completed to fund the e-sports investments. In addition, warrants to a total value of £1.37 million, at prices ranging from 0.1p to 0.25p per share, are being issued to incentivise directors and provide access to further funding.
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SatoshiPay and Sthaler other stand out investments
Micropayments platform business SatoshiPay is Blue Star’s main investment, currently valued at £4.6 million. The company is focusing on expanding its online payment service which allows digital content and service providers to monetise their products. Biometrics payments provider Sthaler meanwhile is advancing commercialisation of its Fingopay product.
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Valuation suggests 35% upside, with the opportunity for further value creation in the medium to long-term
Taking into account recent events we estimate a NAV per share of 0.194p. With Blue Star shares currently trading at 0.115p they are therefore priced at a discount of 41%, which represents upside of 69% should they trade at parity to our estimated NAV. However, to add a degree of conservatism, we apply a 20% discount to our NAV estimate to set our target price of 0.155p per share, implying upside of 35% from current levels. Conviction Buy.
Blue Star Capital is engaged in investment in the media, technology and gaming sectors. Co.'s portfolio includes: Disruptive Tech Limited, which is a Gibraltar based investing company with investments are in VNU Group LLC, an online direct retailer of goods, and Nektan plc, an international B2B mobile gaming company; Sthaler Limited, which is an early stage identity and payments technology business which enables a consumer to identify themselves and pay using just their finger at retail points of sale; and SatoshiPay Ltd, which is developing a two-way payment platform, which enables online content providers to monetize their digital content through the acceptance of nanopayments.
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.
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