Member Info for Hexam

I think it is a muted update with a mixed bag of numbers. Good to see the debt coming down and upbeat forecasts for the full year but I think the part doing the damage to the sp is:

"Whilst actions have been, and will be, taken to mitigate these headwinds, including price increases and a renewed focus on driving business efficiencies, the pressures will not be fully offset, resulting in lower profits than previously anticipated by the Board."

Market doesn't like profit warnings but I think despite this that the company is in pretty good shape but just going to take a little longer to claw its way back due to the pressure on costs.

Will be interested to see anything that suggests arb may pay dividends in the near future - and what form they may be in if not cash? In the meantime this is the latest in writing that I know of (from the final IPO prospectus):

"Since its incorporation, the Company has not declared or paid any dividends on its issued share capital. The
Company intends to retain any earnings for use in its business and does not currently intend to pay dividends on
its ordinary shares or ADSs."

If you're looking for a share that pays dividends then I'm afraid I think you're looking in the wrong place.

"Either that or pay dividends...I mean why not"

Because it needs every penny to fund growth. Can't really see what is to be gained by paying $20m or whatever out to shareholders when that just means they have to find another $20m for new machines etc. - probably from shareholders. No thank you.

Not on the cards and arb have said as much.

"these kind of figures aren't realistic (probably by a factor of x3"

Agreed, but it still makes sense for ARB to mine if BTC is as low as $5k or so as most of those additional costs remain whether they mine or not. As long as the additional revenue from mining covers the additional costs of mining (pretty much just the hosting and electricity) then financially they will be better off doing so. Even if they're not it still makes sense so long as there is a belief that BTC will recover as the difficulty will be so low by then, and the mining numbers so high, that the potential for gains from appreciation will be enormous - provided of course the money doesn't run out in the meantime!

As you say though pretty academic anyway.

"if we use the hodl as collateral for loans or sell to finance new machines then won't be 5000 hodl"

Actually if the hodl is used as collateral for a loan then it will still be hodl in the normal sense and have a value on the balance sheet (and still benefit from any appreciation) - it just can't be used for anything else (like another loan or sold) and of course can be called upon to repay the loan if need be.

Investing at its most basic is about deciding at any given point whether to buy, hold or sell. To choose one of these things it is best to understand what is going on as much as possible and make your own choice including if to sell - especially as it's often a harder decision to do this and 'let go'. So personally I don't care how positive or negative a comment is. If it gives me some information I didn't know before and I feel might be important then I can go off and check it for myself and maybe I can learn something new that will help me make my decision. If the opinion is not based on any substance then I can simply choose to ignore it - regardless of whether it is a baseless ramp or an excuse to knock the company.

I don't know why some get so precious about their own investments (unless they are not confident about it and are just using these boards for reassurance) and I certainly don't get why some people feel they have the right to tell other people what to do with theirs.

"With probably the strongest set of films releases over the last year giving a very strong set of figures which will impress everyone."

I think this year's result will be more of a hurdle to get over than an obvious springboard towards better things. 2022 may have the 'strongest set of film releases' but last year certainly didn't. So not expecting great things in the 2021 results given the closures earlier in the year, box office figures since and that they will probably have to put something through for the Cineplex case. What will be more interesting I think will be any update for 2022 and/or forward looking statements. 2022 could well be a stellar year but better I feel to manage expectations for 2021.

They have paid the deposits on these machines and for the balance they have various ways they could fund some, or possibly all, of it without an equity raise (e.g. selling BTC, further loans) though of course it also depends on the outstanding amount due (which is still undisclosed).

@Wellington99 - That's true and often (as in the case of one of there articles) real net debt is inflated if it includes the value of outstanding lease liabilities.

On the other hand though the EBITDA figure does not include lease repayments since they changed the way they accounted for leases a couple of years back. By no longer counting them as operational leases the impact on profit comes through the asset depreciation line and (as you mention) the interest line - neither of which feature in EBITDA. So EBITDA overstates the cash actually available and so it is better to look at cash flow directly.

I still think CINE has enough headroom but it's tight and unfortunately all these fiddly bits give writers such as MF and SA the opportunity to get things wrong - either because they are incompetent or deliberately, but that's another question!

"If it was a gold mine and gold price collapsed they would shut the mine"

But it isn't a gold mine. I can't see any price that BTC could fall to that would make arb turn off its mining.

If the price falls to $20k it can mine and would still make an overall profit as its all-in costs are lower than this per coin currently.

However the majority of all-in costs would continue even if the machines were turned off. Such costs as staff wages, run-off costs of previously purchased machines etc. So as long as the BTC price was higher than the hosting and electricity costs it would still be worthwhile to mine as although overall they would be making a loss it would be less than if they stopped. This level is between $5-$10k per coin (and is what PW may have had in mind when he mentioned it in a recent interview).

Even if BTC fell below this though I still think they'd mine. Surely if they still believed in BTC in the long-term then why would they not mine coins worth less than $5k now if they thought they would be worth many multiples of this in the future? A bit of short term pain for potentially huge long-term gain.

So I think arb (or any similar scale miner) would carry on until the money ran out or they no longer believed in BTC in which case they'd simply shut down completely and permanently.

Thanks LT.

I’m on a day out so even if my battery holds up I probably won’t respond today to anything you might send so please don’t take it as a sign of rudeness! Will respond when I can though if you have any qs or comments.

LT - Tricky as on a train and battery issues but reckon profit after tax this year will be around £30-£40m (easy to calculate from H1 results, the info since each month and assumption on the expenses they don’t report monthly). This gives P/E ratio perhaps around 10.

If take forward view then mining profit in December was £6.5m. Knock off depreciation of £1.4m and assumed similar other expenses (wages etc) then maybe PBT of £3-£4m per month or so £50m pa tops and that’s before tax.

So maybe £40m so again P/E ratio about 10.

All this ignores BTC rises (including on HODL) but can get any P/E ratio you want really depending on what you assume for this.

Really can’t see how you get a P/E ratio of 5 for ARB???

“Jeez mate 4am in the morning posting on a share you don’t own”

Herdie,I’m in Thailand 7 hours ahead.”

So what time was it in Thailand when you posted at 9pm yesterday :)

My comment was actually directed at Chuz for the irony in calling someone "amature" but yes, not lost on me that my name has been mangled again.

...but at least those "amatures" got their spelling correct ;)

Herdie,

I agree in that sense but I was meaning more from the impact on argo and the sp - until of course they mess up the numbers on something that really matters.

Slap forehead emoji time.

Seriously I think it's not that big a deal but really it shouldn't keep happening.

No - I spotted that too and the website is still showing 1.605EH. Hopefully they haven't installed the remaining machines yet as this makes the December results even better and there's still a further uptick to come.

LA - Because the coins mined are fixed absolutely and to maintain our share we have to invest hundreds of millions like everybody else just to keep up.

Could argue that other industries are usually chasing the same customers but they only have to invest a fraction of what the digital mining companies do to try to maintain their share.