HIVE Blockchain Technologies Ltd

HIVE Blockchain Technologies Ltd (TSXV: HIVE) is a service provider of infrastructure solutions used by the blockchain industry, and also includes mining of digital currencies. 

Key Updates:

• Focus on expansion: The Company has been continuing to utilize cash flows generated from its Ethereum mining operations to upgrade and expand its Ethereum mining equipment and to support the scaling up of its recently acquired Bitcoin mining operation in Canada.
• Focus on upgrading Ethereum mining: HIVE has undertaken a program to upgrade and expand its GPU equipment to maintain its Ethereum mining industry footprint. HIVE intends to complete this project by the end of 2020. However, the negative impact on the global supply chain related to the COVID-19 pandemic does present challenges including increased shipping costs and obtaining equipment from China on a timely basis.
• Strong Industry Momentum: The future prospects of blockchain remains very optimistic, as worldwide spending on Blockchain is expected to grow at ~60% CAGR to USD 15.9 billion in 2023. The industry witnessed solid traction across the Ethereum platform and has been ranked top among crypto projects as per user activity. Moreover, the Ethereum miners witnessed a six times revenue increase so far this year, which is a key positive too.

 Source: Company Presentation

• Purchase proposal of GPU Atlantic Inc: Recently, the company announced that it would purchase 100% of the GPU Atlantic shares, in order to expand its footprint across Canada. Atlantic has access to 50 megawatt of low-cost green power in Grand Falls.

Q2FY21 Financial Highlights:

• HIVE announced its quarterly results, wherein the company posted income from digital currency mining of USD 12.989 million, higher than USD 12.007 million in the previous corresponding period (pcp).
• The company posted net income before and after tax for the period at USD 9.210 million, as compared to a loss of USD 11.526 million in Q2FY20. The quarter was marked by lower operating and maintenance costs, higher depreciation, higher finance expense and a significant decline in total expenses.
• Net income of the company stood at USD 9.349 million, as compared to a net loss of USD 11.52 million in pcp.
• HIVE posted its cash and equivalent of USD 5.831 million, while total assets stood at USD 46.686 million.            

Q2FY21 Income Statement Highlights  (Source: Company Reports)

Risks: The operation is related to a significant amount of risks from global financial markets, and price volatility within the digital currency space. Moreover, the company might witness volatility of network hash rates which might impact the group’s costs of mining.

Stock Recommendation:

The recently acquired Bitcoin mining facility powered by green energy would support next-generation equipment and can be used by the company’s clients. The group has a healthy balance sheet and has gone through significant operational restructuring during the last 18 months, which is likely to drive higher transparency, accountability and profitability across operations. The stock of HIVE appreciated handsomely in the recent past and was up by ~253% and ~420% in the last three months and nine-months, respectively. The stock closed above its long-term support levels of 100-days, 150-days and 200-days simple moving average (SMA), indicating a bullish trend. On the valuation front, the stock is trading at a P/E multiple of 24.6x against industry average of 42.5x on TTM basis. Hence, considering the aforesaid facts, we recommend a ‘Speculative Buy’ on the stock at the closing market price of CAD 1.38 on December 08, 2020.

HIVE Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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