Member Info for Hexam

Sorry Swans - got my $s and £s mixed up. Just a mere £5m profit in May assuming 180 BTC mined. I'd still take that!

Swans - That's correct but that's just revenue. If we mine 180 then yes it gives £10m of income but then have to deduct the direct cost of mining (at 85% margin this would be £1.5m) and other costs (admin costs, depreciation on the machines purchased etc.). This would still leave profit of about £6m which is still very tasty and that is before any BTC price movement on HODL - so this figure goes up if BTC over $57k at end of the month (and down of course if it falls).

It really is that good!

IanH1. Their day to day cash requirements are relatively small. The mining costs are only about £1m per month at the moment (must admit I don't know how exactly these are paid). In addition they have administration costs (wages etc.) but these were only £2.4m in total last year. The other main cost is depreciation but obviously this is not a cash cost.

I think they have plenty of cash at the moment for working capital (raised £49m in Q1 and spent less than half of this I think so far - rest to be used for Texas development etc. )

Also they don't hold BTC indefinitely anyway - and it is not a policy that they will. It's only this year that's they've held most/all that they've mined (as they have cash from above for operational costs etc.).

I know - the BTC HODL is part of the £100m profit (from the assumed modest increase in BTC) and the rest of the good news is cherries on top. I just try to stick with what is 'known' and if that's good enough all the better. I know PLUTO will be on the balance sheet but I don't expect it will impact earnings much this year.

I must admit I'm not in this because of a love of all things Crypto but because of the strong financials but I suppose that just reflects my background.

So I'm not too fussed by daily movements in BTC or SP, I just know ARB is probably on track to make around £100m gross profit this year. Sure, this is a forecast with all the usual caveats but it's easy to see this is where it is heading given current mining levels and margins, the low expense base, expected increased capacity and assuming only a modest increase in BTC value.

Let's say that translates to profit of £80m after tax and compare that to it's current mcap of under £600m. A P/E ratio of under 8.

It's crazy - that's why I'm invested. Show me another company currently making this sort of money, that is still growing fast and is valued at this sort of price and I'll happily invest in that too.

If you're use a high P/E ratio you will get an even bigger SP! £1.95 implies a P/E ratio of less than 10 which is very low for a
company still in start up and profits still growing. So yes, very conservative - but I agree that's not always a bad thing.

...sorry that should be £100m gross profit!

I don't know where you've picked the very precise number of £1.95 from but if the company makes £100 gross profit this year (which I agree it should) then even though any value from this is still subjective I believe £1.95 would be very, very cheap. IMO it should be well over £3 with those sort of profits and using reasonable P/E ratios.

Otherwise agree!

Jtf - Stop shaking that bottle!

Seriously though - you're right. I keep banging on about the profits because they are so good and ultimately they will drive the sp up. I try not to look too far ahead though as the numbers just get crazier and crazier - as you've shown :-) - even though that is the sort of direction that they really are heading in at the moment.

I just think ARB is at the moment the stockmarket's best kept secret - which is great for anybody new looking to invest but not so hot for those LTHs frustrated about the current sp. GLA and please DYOR as there is a lot of good info out there for you to derive your own comfort from, rather than just from believing what is posted here.

@Poptimist - I sympathise with your position and understand your frustration - though I disagree that it is all the shorters' doing (shorting a company that has such good fundamentals seems reckless at best).

My own feeling is that a lot of the good news for this company is simply flying under the radar at the moment for most investors, who even if they have heard of ARB are just seeing the relatively small numbers (e.g. 2020 profit c.£1m).

IMO this is all set to change soon though either through nasdaq or the publication of much larger profits - or more likely both (the first may already be happening and on the second the company is currently clearing over £5m mining margin a month and about £4m profit per month after all expenses - and that is before any BTC appreciation and the expected increased mining capacity).

So barring big BTC falls I don't think you have to wait very long at all for the sp to start motoring (weeks or months not years) and hopefully, if I'm right, that will be soon enough for your needs. In any event - Good Luck!

I feel at the moment that the company is like an adolescent, caught in a difficult growing phase between first, the exuberance of youth when most investors saw this as a straight crypto play and alternative to BTC (which may explain why the sp previously followed BTC so closely) and second, a more mature company that is traded on actual/expected performance.

Some of the kids though have got tired and moved onto other, newer, shinier toys. In the meantime, more serious investors have started to be attracted by the strong profit potential but many may still be put off by a suspicion/ignorance of BTC and a worry over its volatility. In this phase the sp is detached from BTC as opposing sentiments are ruling the day.

Once the profits become more visible I think the link with BTC will become re-established again, though not as closely as before, as clearly the financials are linked to BTC but it is not the only driver. The size of those profits should also ensure the sp is somewhat higher than in it is now.

All just theory of course and could be nonsense but seems to fit pretty well. If it is close to what is happening then could imagine this phase going on a few more months until nasdaq speeds up the access to that wider pool of investors or those bigger profits are reported and so become more transparent to the market.

I agree that it is not nice sitting on paper losses but all I was saying was that I had no idea how the sp is going to move in the short-term - so many things can affect this on a daily basis as we have seen and often we don't know what those things are that are driving it (we can only guess).

I think longer term is different though as ultimately the sp should be driven by profits (and also dividends). Whilst dividends may be further down the road, handsome profits should be just around the corner (assuming ARB continue do what they are doing and BTC doesn't fall significantly). So personally I feel a lot more confident about the sp in 6-12 months than I do now and for me at least that reduces the stress a bit over where the sp is at the moment. But again nothing is certain.

"The tug of war hasn't been won either way yet but I think something's going to give soon and I'm siding with the bulls/longs now."

Totally agree it is a tug of war on the sp - it's a very good analogy. But I think it is only a tug of war as this is still a share traded more on sentiment (small profits but huge potential vs mistrust of BTC and fear of it crashing). The financials for this company are far easier than most to forecast (for any assumed BTC value) and the profits this year should be so large (c.£100m) that it will move from potential to delivery. This should mean the share is traded more on its actual profits outlook (like most shares) which and this will make £2-£3 per share look very cheap IMO.

So not sure which way the tug-of-war will go in the short-term but by the end of the year there's only one one winner for me - with the usual caveat of assuming BTC doesn't take a dive to the canvas!

Buyerspromise - as someone has already pointed out 163 refers to the number coins that were mined in April (not the current holding or value).

The point you were making though seemed to be that ARB hold on to all the coins mined and rather than come cap in hand to shareholders that they should spend some of their btc instead.

It is simply not true that they do this though. As I said, last year they sold almost as many as they mined or bought. This is part of their strategy - they don’t simply HODL everything but try to choose what is best at the time depending on prices, risk etc. Responsible management in my view.

ARB bought/mined £28.8m of Crypto in 2020 and sold £27.3m. So I'd say they've used a fair amount of bitcoin to finance things already?

The difference is that MARA and RIOT have fallen from what I think is an overvalued position whilst ARB is falling from what I feel is an undervalued position. If or when we get onto nasdaq I think this will boost the sp simply as we will gain better access to a market where investors are more tuned into Crypto - but then of course the sp will still go up and down like all other shares do.

I say ARB is "undervalued" but that is just my opinion as I agree with HarChris that there is no such thing as a true value of a stock. There are only two values that matter - the price it actually is and the one you think it should be and everybody will have their own view on what that price is. Personally I think £1.67 is amazingly cheap given the strong financials and the future plans that will make them even stronger and so whatever the price does now, tomorrow or next week I am happy to wait until the market catches up (or I'm proved wrong).

Hi K3VMC,

I totally agree with you and wasn't try to do you down by nit-picking your numbers. The BTC rises are significant though and other costs are also significant (especially the depreciation on the mining machines etc.). I was just concerned that your post was labelled as "factual" by someone else when it wasn't and might mislead people into using mining profit as total profit.

In fact as most of the extra cotsts are fixed and the BTC rises since Jan 1 have already been significant. So even assuming modest BTC increases going forward the overall profit numbers are actually much better than those you suggest. That's even before allowing for all the other good things coming down the line.

Whatever way you look at I agree - it is "AMAZING" and those that worry about to day-to-day SP just need reminding just how strong the financials of the company are and that, in the end, profits are the biggest driver of sp.

Except it wasn't completely factual. The gross profit margin was not £190,000 per day. This is just the mining profit and excludes all the other sources of income (like Crypto appreciation if BTC goes up) and expense (notably depreciation and admin expenses).

The total profit margin though is not too far away from this and totally agree that once these overall profit numbers are public the sp is likely to fly.

Excellently put Argobull.

I would just add that as part of that extra research I suggest looking at the companies financials in the report and accounts and the monthly updates. The maths is pretty easy on this company and only a few assumptions are needed in order to project future likely profits.

The answers you come up will look so good you’ll soon checking that you’ve done the sums right (unless of course you haven’t)!