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

• Exponential Growth in AUM: The company reported its Asset Under Management of USD 2.9 billion on FY21, which soared 256% on y-o-y basis, supported by strong growth from its all business segments. During the period, the company launched two crypto-currency funds namely, CI Galaxy Bitcoin ETF and Galaxy Ethereum Funds, which received marvelous response due to growing traction across the digital assets and blockchain segments.
  

• Growing Demand within Crypto currency segment: In the last few years, we have seen a massive growth in crypto users across the globe. The group provides spot, derivative and financing liquidity to clients, counterparties and venues that transact in cryptocurrencies and other digital assets. The company offers more than 750 unique counterparties and acts as an institutional-grade liquidity provider with market expertise and global access to over 100 different cryptocurrencies. Hence, with a wide array of crypto currency products, the company is well placed to cater to the growing demand within this segment.
  

• Result Update: The company will disclose its Q1FY22 result on May 09, 2022.

• Cash Flow turned positive: In FY21, the company reported tremendous improvement in its operations and posted its cash flow from operations of USD 256.9 million, as compared to a cash outflow of USD 142.4 million in FY20. This is impressive and is expected to support the company’s liquidity.

Risk Associated with the investment:

The company’s operation is directly correlated to the movement of the cryptocurrency, capital market and other speculative asset classes. Hence a volatility within these asset classes might dampen the company’s performance.

FY21 Financial Highlights:

FY21 Income Statement Highlights (Source: Company Report)

• GLXY announced full-year result, wherein the company posted its total income of USD 1,365.5 million, surged from USD 304.1 million in FY20. The growth was driven by higher Advisory and management fees coupled with higher net realized gain on digital assets (USD 1,014.2 million v/s USD 271.1 million in FY20).
• The period was marked by higher input costs due to increase in Compensation and compensation related costs, higher General and administrative expense. Other than that Equity based compensation expense and Professional fees expense stood higher than FY20. Total operating expense stood higher at USD 364.5 million v/s USD 79.8 million in FY20.
• GLXY reported a higher net unrealized gain on digital assets and investments during FY21 along with a higher gain from non-controlling interests’ liability. Hence, net income for the year stood at USD 1,714.2 million versus USD 385.5 million in FY20.

 Valuation Methodology (Illustrative): EV to Sales Based

Analysis by Kalkine Group

Stock Recommendation:

The company offers Full Suite of Products required for Acting in and Holding Digital Assets, which includes Asset Management, Trading, Investment Banking, Principal Investments, and Mining. This looks promising considering the growing global demand for digital currency. We have valued the stock using the EV to Sales based relative valuation method and have arrived at a double-digit upside (in percentage terms). For the said purposes, we have considered peers like SLR Investment Corp, Coinbase Global Inc etc. Considering the aforesaid facts, we recommend a ‘Speculative Buy’ rating on the stock of GLXY at the last closing price of CAD 14.86 on April 27, 2022. 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 27, 2022). Source: REFINITIV, Analysis by Kalkine Group

Note: The reference data in this report has been partly sourced from REFINITIV

Technical Table:

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.