Goldmoney has a 168 per cent upside, Mackie Research says

Despite the pullback in cryptocurrencies, Goldmoney Inc. (Goldmoney Inc. Stock Quote, Chart, News: TSX:XAU) should benefit from its existing and new revenue lines, says Nikhil Thadani of Mackie Research Capital.

On Monday, the analyst maintained his “Speculative Buy” recommendation and 12-month target price of $8.25.

Last week, secure investment and payment services company Goldmoney reported its financials for the quarter and year ended March 31, 2018, with revenue for the quarter of $171 million, $31 million of which came from its cryptocurrency services, representing a 36.6 per cent increase over the previous quarter.

Thadani says that the company has done well over the past year to take advantage of the new interest in cryptocurrencies. “Management has proven to be astute capital allocators by opportunistically benefiting from last year’s crypto run-up,” he says in a client update. “XAU generated cash gains from this segment versus many newly launched & pre-product crypto and blockchain related companies.”

“Management has successfully added numerous new revenue producing offerings in our over two years following XAU,” he says. “A strong balance sheet (~$50 million in cash and restricted cash ex. ~$20 million in GICs), with no debt provides ample fuel to sustain organic growth initiatives. A renewed focus on growing high value users, geographic expansion (China joint venture & additional branches) serve as important growth drivers.”

The analyst says that even with the pullback in the crypto-space, custodian services such as Goldmoney’s will continue to be a necessary part of crypto’s gaining institutional traction.

Thadani has revised his estimates for XAU, calling for revenue, EBITDA and Adj EPS for FY2019 of $683.40 million (was $633.05 million), negative $6.4 million (was negative $5.3 million) and negative $0.08 (was negative $0.06), respectively.

The analyst’s $8.25 target represents a projected return of 168 per cent at the time of publication.