Argo Blockchain - Re-Initiation of Coverage

Efficient, highly profitable and undervalued crypto miner offering a material value dislocation opportunity in the crypto space

Argo Blockchain plc is a global data centre business that provides a purpose-built and flexible platform for the mining of leading cryptocurrencies in the enterprise-scale and institutional sectors worldwide from operational centres in Quebec, Canada. Following a change of strategy earlier this year the company is now focused on mining cryptocurrency for its own book and providing an enterprise level Mining as a Service (MaaS) product.

  • Strategic shift vindicated by recovery in crypto prices

    In February 2019, following a fall in crypto prices, Argo made the decision to cease its previous consumer Mining as a Service (MaaS) offering and mine cryptocurrencies for its own account. Following a strong rise in the Bitcoin price since April this year, performance has beaten expectations, with £1.36 million of cryptoassets generated in July following a strong Q2.

  • Investment in hardware set to more than double capacity by year-end

    In July, Argo announced a major expansion of capacity to support its Bitcoin mining operations, ordering 5,000 additional, new generation Antminer S17 mining machines. Argo expects to have a BTC mining capacity of 220Ph by the end of Q3 when it receives a previously announced order of 2,500 machines. Following their installation, expected in Q4, Argo’s total Bitcoin mining capacity will increase by c.129% from Q3 to 505Ph making it one of the biggest and most efficient mining platforms worldwide.

  • Investors await news on partnership with HIVE Blockchain

    In May 2019 Argo announced a conditional heads of terms agreement with TSX-V listed crypto miner HIVE Blockchain Technologies Ltd, to create the world's largest purpose-built business-to-business mining service provider aimed at large-scale enterprise and institutional customers. Discussions over this, and a proposed share swap agreement, are continuing.

  • Yield based valuation suggests 107% upside

    Our forecasts see Argo making a net profit of £4.86 million in 2019, rising to £8.59 million in 2020. We set our first target price for the shares at 14.62p, based on a 2020 dividend payout ratio of 30% and 6% yield. Additional earnings and efficacy based valuations suggest further blue-sky potential. Conviction Buy.

  • RISK WARNING & DISCLAIMER

    Argo Blockchain is a research client of Align Research. Align Research and a director of Align Research hold an interest in the shares of Argo Blockchain. Full details of our Company & Personal Account Dealing Policy can be found on our website http://www.alignresearch.co.uk/legal/ 

    For full disclaimer information please refer to the last page of the full document. This investment may not be suitable for your personal circumstances. If you are in any doubt as to its suitability you should seek professional advice. This note does not constitute advice and your capital is at risk. This is a marketing communication and cannot be considered independent research.

Table: financial overview
Year to Dec H1 2019E H2 2019E FY 2019E FY 2020E
Mining income (£m) 2.62 11.6 14.22 27.23
Pre-tax (£m) (0.19) 6.23 6.04 10.44
EPS (p) (0.06) 1.72 1.65 2.92
Source: Align Research

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