Bitfarms Ltd (TSXV: BITF) is a global Bitcoin self-mining company, running vertically integrated mining operations with onsite technical repair, proprietary data analytics and company-owned electrical engineering and installation services to deliver high operational performance and uptime.

Key Updates:

• Operational update: Recently, the company reported that it has purchased 1,000 BTC for USD 43.2 million. This increased the Bitcoin (BTC) holdings to more than 4,300 as of January 10, 2022, reflecting an increase of ~30%. Notably, the company has added 1,000 BTC each during Q3FY21 and Q4FY21, respectively.
  

• Healthy Balance sheet: The company has lowered its D/E ratio to 0.07x in Q3FY21 from 0.11x in Q2FY21, which is again below the industry median of 0.16x. A lower D/E ratio indicates higher financial flexibility and is a key positive. Moreover, the company reported its long-term debt to total capital at 2.2%, significantly lower than the industry median of 14.4%. This indicates lower balance sheet risk and is a key positive.

• Robust margin profile: The company reported strong profitability margins aided by improved operational efficiencies, which is commendable. In Q3FY21, the group reported an EBITDA margin of 55.5%, significantly higher than the industry median of 7.9%. Moreover, the company’s operating margin and net margin stood at 76.3% and 53.0%, respectively, as compared to the negative industry median of 0.4% and 6%, respectively.
  

Q3FY21 Financial Highlights:

Q3FY21 Income Statement Highlights (Source: Company Report) 

• In Q3FY21, the company reported its total revenue of USD 44.7 million, surged from USD 6.7 million in pcp. Revenues increased mostly due to the increase in average Bitcoin price and the increase in Bitfarms’ hashrate coupled with the decrease in network difficulty.

• The quarter was marked by a higher cost of sales, increase in general and administrative expenses and inclusion of loss on revaluation of digital assets amounting to USD 13.8 million. Operating income was recorded at USD 34.09 million, as compared to a loss of USD 3.3 million.

• The company reported a net income of USD 23.7 million, as compared to a net loss of USD 4.7 million in pcp.
  

Valuation Methodology (Illustrative): Price to Earnings-based

Analysis by Kalkine Group

Stock Recommendation:

On a year-to date basis (9MFY21), the group reported strong operational performance and posted EBITDA of USD 41.4 million, significantly higher than USD 1.9 million in pcp. Notably, the EBITDA margin during the period stood at 38%, considerably higher than 8% in pcp. We have valued the stock using the P/E based relative valuation method and have arrived at a double-digit upside (in percentage terms). For the said purposes, we have considered peers like HIVE Blockchain Technologies Ltd, Riot Blockchain Inc etc. Considering the aforesaid facts, we recommend a ‘Speculative Buy’ rating on the stock at closing price of CAD 4.33 on March 08, 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 March 08, 2022). Source: REFINITIV, Analysis by Kalkine Group 

Technical Analysis Summary:

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest. 

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest. 

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices 

Note 1: The reference data in this report has been partly sourced from REFINITIV.

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.