Galaxy Digital Holdings Ltd. (TSX: GLXY) is a technology-driven financial services and investment management firm that provides institutions and direct clients with a full suite of financial solutions spanning the digital assets ecosystem. Moreover, it operates in the following businesses: Trading, Asset Management, Principal Investments, Investment Banking, and Mining. 

Key highlights

• Enormous jump in net comprehensive income: In FY 2021, the company reported huge jump in its net comprehensive income, which increased by 345% to USD 1.7 billion, from USD 385.5 million in the prior year. The increase was primarily a result of strong contributions from its trading and principal investment businesses driving realized and unrealized gains on digital assets and on investments. Additionally, its Income from the trading business increased 302% to USD 985.3 million, from USD 245.0 million in the prior year.

Source: Company’s Reports

• Rising assets under management: The company’s affiliate, Galaxy Digital Asset Management, ("GDAM"), preliminary assets under management of USD 2,877 million as on December 31, 2021, a 29% increase from the quarter ended September 30, 2021, and a 256% increase on year-to-date basis. AUM consisted of USD 2.2 billion in GDAM's Galaxy Fund Management products, and USD 658 million in the Galaxy Interactive venture franchise, hence the above numbers depicts that the group is increasing its AUM on the quarterly basis as well as on yearly basis, which is a key positive.

Source: Company’s Reports

• Update on BitGo Acquisition: Galaxy and BitGo intend to complete the proposed transaction and have renegotiated the acquisition agreement with the following terms: The consideration to BitGo shareholders will consist of 44.8 million newly issued shares of Galaxy Digital common stock and USD 265 million in cash, implying an aggregate transaction value of approximately USD 1,158 million based on Galaxy Digital's closing price on March 30, 2022. BitGo shareholders will own approximately 12% of the pro forma company.

• War uncertainty raised focus on Bitcoin and digital assets: Commodity prices have risen dramatically as a result of the Russian Federation's invasion of Ukraine and the subsequent sanctions imposed on It by a large international coalition of nations, putting additional upward pressure on inflation gauges. The introduction of tough sanctions, including the freeze of Russia's foreign-held central bank forex assets, has heightened interest in Bitcoin and other digital assets as non-sovereign assets having some credibly neutral features. The asset's non-supply-based properties are becoming more well-known, which could lead to increased use in 2022.

Risks associated with investment: The company’s business model is significantly exposed to the volatility in the cryptocurrency prices, equity market and other speculative asset classes. A downturn in the global financial market could have a significant impact on the group’s performance. 

Financial overview of FY 2021 (In 000’s of USD)

Source: Company Filing

• On the back of higher Advisory and management fees along Net realized gain on digital assets and investments in FY 2021, the company reported robust strong Income of USD 1,365.5 million compared to USD 304.1 million in the previous corresponding period.

• In the reported period the company’s expenses skyrocketed to USD 364.5 million against USD 79.8 million in pcp.

• Primarily on the back of robust income the company clocked net income of USD 1,714.2 million against USD 385.5 million in pcp.
  

Valuation Methodology (Illustrative): EV to Sales based:

Analysis by Kalkine Group 

Stock recommendation

Galaxy Digital and its sector had a transformative year in FY2021, as it achieved strong net comprehensive income of USD 1.7 billion and increased its AUM by 256 percent to USD 2,877 million. The group is raising its AUM on a quarterly as well as yearly basis, which is a significant positive. Furthermore, the current uncertainty surrounding the Russian invasion of Ukraine has increased interest in Bitcoin and other digital assets. Finally, as more people become aware of the asset's non-supply-based attributes, adoption may increase in 2022, which would be a beneficial move for the organization.

Therefore, considering the above rationales, optimistic aspects, and valuation, we recommend a “Speculative Buy” rating on the stock at the last closing price of CAD 16.67 on April 11, 2022. Additionally, the markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

One-Year Technical Price Chart (as on April 11, 2022). Source: REFINITIV, Analysis by Kalkine Group 

Technical Analysis Summary

Disclaimer

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