HIVE Blockchain has an 87 per cent upside, says PI Financial

Cryptocurrency miner HIVE Blockchain Technologies (HIVE BLOCKCHAIN TECHNOLOGIES STOCK QUOTE, CHART, NEWS: TSXV:HIVE) has closed on its acquisition of data processing company Kolos Norway AS, which is enough for a share price target upgrade, says analyst David Kwan of PI Financial. In a Tuesday corporate update, Kwan reiterated his “Buy” recommendation and “Speculative” risk rating with a new target of C$2.30 (previously C$1.80).

Yesterday, HIVE announced the deal, which will see HIVE acquire all issued and outstanding shares of Kolos for approximately $7.22 million, along with 4,750,000 common shares, 1,250,000 warrants and $2.72 in liabilities (all figures in US dollars unless otherwise noted).

With digital currency mining facilities already established in Iceland and Sweden — and presently totalling 24.2 MW of computing power, along with an extra 20 MW in Sweden projected to come online by September, 2018 — HIVE says that the Kolos deal furthers its expansion plans in the region.

“I am extremely pleased by the completion of the acquisition of Kolos which provides HIVE the capability to rapidly expand our footprint in the Nordic region and maintains HIVE’s position as a leading blockchain and cryptocurrency infrastructure company,” said Harry Pokrandt, CEO and Director of HIVE, in a press release. “The property supplies near term access to an additional 30 MW of capacity and provides HIVE a deep pipeline of opportunities for many years to come. I would like to commend the team at HIVE for their tireless work to complete the Norway Acquisition.”

Kwan says that the final purchase price was generally in line with his expectations stemming from the deal’s initial announcement in late March.

“We estimate HIVE has ~$27M in net cash and digital currencies after accounting for the current buildouts in Sweden and the acquisition of Kolos,” says Kwan. “Should the Company look to do an initial buildout that utilizes the 30MW currently available (the site has access to >1 GW/1,000MW), additional funding would be required.”

“Management is currently evaluating (non-dilutive) options to finance this expansion. However HIVE decides to fund this buildout in Norway, we believe HIVE’s exclusive partner Genesis is likely to have a key role,” the analyst says.

Kwan has adjusted his estimates for HIVE to reflect both the closing of the Norway deal and the recent market changes in currency prices, with the analyst estimating the price of Ether at $675 (was $475) and Bitcoin price put at $8,250 (was $8,000).

The analyst’s revenue and Adj. EBITDA estimates for fiscal 2018 are $13.1 million (unchanged) and $6.5 million (unchanged), respectively, and his revenue and Adj. EBITDA for fiscal 2019 are $68.0 million (was $56.6 million) and $34.2 million (was $22.8 million), respectively.

Kwan’s C$2.30 target represents a projected return of 87.0 per cent at the time of publication.

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