Original-Research: Advanced Blockchain AG - von GBC AG

Einstufung von GBC AG zu Advanced Blockchain AG

Unternehmen: Advanced Blockchain AG
ISIN: DE000A0M93V6

Anlass der Studie: Research Report (Note) Empfehlung: Buy
Kursziel: 11.00 EUR
Kursziel auf Sicht von: 31.12.2024
Letzte Ratingänderung:
Analyst: Matthias Greiffenberger, Julien Desrosiers

Successful cost-cutting program: Advanced Blockchain AG maintains EBITDA at previous year's level. Bitcoin halving in March 2024: supply shortage as a catalyst.
 
The first half of 2023 witnessed Advanced Blockchain AG navigating through a persistently volatile capital market, grappling with inflation concerns, and contending with geopolitical uncertainties on both financial and societal fronts. The crypto winter, intensified by the FTX collapse and the insolvency of other crypto exchanges and custodians like Genesis, continued to exert its influence. This was notably reflected in the pronounced volatility of Bitcoin, commencing the year at $16,500 and concluding on June 30, 2023, at $30,350—a significant distance from its pinnacle of $69,045 in November 2021.
 
Ongoing efforts to regulate crypto assets, exemplified by MiCA regulation (Markets in Crypto-Assets), persist. MiCA, an EU-approved regulatory framework for crypto assets, aims to establish risk-appropriate regulation enhancing investor protection and contributing to the functionality of cryptocurrency markets. MiCA's implementation is to unfold in two stages, with specific provisions, particularly those pertaining to asset-referenced crypto assets and E-money tokens (stablecoins), anticipated to take effect from July 2024. The majority of the regulation is slated to be operational in early 2025. The regulation imposes requirements on crypto asset providers and traders, mandating the submission of a whitepaper to supervisory authorities. Additionally, it champions consumer protection by necessitating a publicly accessible register for crypto asset whitepapers and providers of crypto asset services.  
MiCA categorizes crypto assets into three segments: E-money tokens, asset-referenced tokens, and utility tokens. While encompassing common cryptocurrencies like Bitcoin and Ethereum, it excludes security tokens or non-fungible tokens (NFTs). Issuers of asset-referenced tokens and E-money tokens must fulfill minimum liquidity requirements and have their headquarters within the EU. The regulation introduces a customer right of redemption against issuers and anti-money laundering regulations that necessitate customer identification for crypto service providers. These regulations also extend to transactions between 'hosted wallets' and 'unhosted wallets,' requiring identification of the owner of the 'unhosted wallet' for transactions exceeding 1,000 euros.  
The imminent introduction of Bitcoin ETFs by major asset management entities such as BlackRock is suggested by the current news flow in the United States. The proposed spot Bitcoin ETF by BlackRock, listed with the Depository Trust & Clearing Corporation (DTCC), indicates potential approval by the U.S. Securities and Exchange Commission (SEC). The SEC is expected to make a decision by January 10, 2024. Approval of such an ETF could pave the way for additional crypto ETFs, including those from ARK Investment, Fidelity, and Valkyrie. While the SEC sanctioned Bitcoin futures ETFs in October 2021, no Bitcoin or Ether spot funds have been listed on U.S. exchanges.
 
Adding to the landscape is the significant event of the upcoming Bitcoin halving in March 2024, where the miner reward will be halved. This anticipated supply shortage could exert a positive influence on the performance of Bitcoin.
 
In the first half of 2023, Advanced Blockchain experienced a reduction in revenue to €1.23 million (compared to €23.4 million in the previous year). This decline can be attributed to a diminished number of portfolio transactions.
 
EBITDA stood at €0.52 million (compared to the previous year's €0.88 million). Despite the dip in revenue, EBITDA was successfully maintained close to the previous year's level, owing to the effective implementation of a cost-saving program by the management. EBIT even achieved a positive value of €0.45 million (compared to the previous year's -€0.54 million). The same positive trend extended to the net result, reaching €0.45 million in the first half of 2023 (compared to the previous year's -€0.54 million).  
As of June 30, 2023, the equity of the company remained relatively unchanged at €14.48 million (compared to €14.93 million on December 31, 2022). The equity ratio also held steady at 67.3%, mirroring the figure as of December 31, 2022 (66.3%). The predominant portion of equity and token investments, amounting to €16.63 million, is documented within the category of other assets.
 
The working capital exhibited an increase, reaching €-0.52 million (as opposed to €-3.78 million on December 31, 2022), propelled by a notable surge in trade receivables, which climbed to €2.74 million (compared to €0.01 million as of December 31, 2022). The persistently negative working capital underscores the efficient utilization of available capital, with only limited funds being tied up.
 
Cash and cash equivalents experienced a significant decline to €0.34 million (versus €3.49 million on December 31, 2022). Given the ample liquidity of certain securities in the portfolio, we hold no apprehensions concerning the existing low cash position of the company. Additionally, approximately €3 million was allocated to new investments during the first half of 2023, capitalizing on a favorable investment climate. These strategic investments are anticipated to establish a robust groundwork for forthcoming positive outcomes, fortifying the company's standing in the market.
 
Due to the lack of a published cash flow statement, we are unable to perform a detailed liquidity analysis.
 
In the fiscal year 2023, Advanced Blockchain AG has been strategically focusing on sustainable growth and meticulous cost management. The company anticipates a reduction in expenses coupled with revenue generation through token transactions and potential investments in upcoming token issuances. Advanced Blockchain AG is actively engaged in advanced negotiations with potential buyers for portfolio investments tied to token and equity transactions, with the objective of achieving up to five successful sales, totaling €5 million.
 
Currently, the company is in the planning stages of issuing a new convertible bond with a total value of up to €3 million, intended to replace the existing convertible bond expiring on July 14, 2024. The volume was subsequently limited to a nominal amount of €1.1 million on October 17, 2023. This fresh bond boasts a six-year term and an annual interest rate of 3.0%, with a conversion price set at €4.25. It is proposed to issue up to €1.5 million through the exchange of convertible bonds previously issued by the company (ISIN: DE000A3MP4Q7). The net proceeds stemming from the issuance of the convertible bond 2023/2029 will be allocated to general business purposes, encompassing the financing of additional investments and the advancement of the existing portfolio.  
In a noteworthy development, Advanced Blockchain AG successfully secured another prominent investor, selling 100,000 of its own shares to a fund managed by Axxion S.A. at a per-share price of EUR 2.70.  
To sustain its pioneering role as a blockchain incubator and Web3 investor, Advanced Blockchain AG is strategically expanding its team of global experts and planning to initiate two to three new investments. The company is also gearing up to implement cross-chain initiatives across various blockchain domains to leverage success and network effects. A commitment to ongoing research and clear strategies will steer the progress and adoption of diverse topics and use cases. Through the incubation of promising protocols and technologies, Advanced Blockchain AG aims to bolster the growth of the global blockchain ecosystem.  
The continuous assessment of the top 10 portfolio investments is geared towards enhancing transparency for investors. As of May 31, 2023, the top 10 investments encompass peaq/EoT Labs GmbH (incubation, equity, and token investment), Mero (token investment), Contango (token investment), Maverick (token investment), Talisman (token investment), Neon Labs (token investment), Obol Network (token investment), Polymer (equity and token investment), DELV/Element Finance (token investment), and Composable Finance (incubation and token investment), presented in no particular order. Based on an independently valued assessment as of May 31, 2023, these top 10 Advanced Blockchain portfolio companies currently reflect a total value of €39.65 million. Our analysis suggests a conservative valuation approach, and we believe the fair value of the listed positions is likely higher, estimating it to be around €45 million.  
The undervaluation of Advanced Blockchain becomes strikingly apparent when focusing solely on the top 10 positions in the portfolio and the market capitalization. These top 10 positions alone carry a fair value of at least €40 million, whereas Advanced Blockchain's market capitalization currently hovers around €11 million. We posit that the remaining portfolio positions hold a similar value to the top 10, leading us to estimate the current portfolio value at approximately €90 million. Factoring in holding costs of €2 million, the adjusted total value of the portfolio after deducting these costs should be around €88 million.
 
Our enterprise value estimation, based on the net asset value (NAV), stands at approximately €88 million, equating to €23.19 per share. In light of the pronounced downturn in the crypto markets and the persistent 'crypto winter,' we have applied an additional discount to the fair value, currently pegged at around 53%.
 
We are maintaining our valuation. We have determined a fair value of €41.74 million or €11.00 per share. Due to the considerable upside potential, we assign a BUY rating.

Die vollständige Analyse können Sie hier downloaden: http://www.more-ir.de/d/28323.pdf

Kontakt für Rückfragen
GBC AG
Halderstraße 27
86150 Augsburg
0821 / 241133 0
research@gbc-ag.de
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Offenlegung möglicher Interessenskonflikte nach § 85 WpHG und Art. 20 MAR Beim oben analysierten Unternehmen ist folgender möglicher Interessenkonflikt gegeben: (5a,11); Einen Katalog möglicher Interessenkonflikte finden Sie unter: http://www.gbc-ag.de/de/Offenlegung
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Date (time) Completion: 17.11.2022 (11:20) German version: 13.11.2022 (12:30) Date (time) first publication: 17.11.2022 (12:00) German version: 13.11.2022 (13:30)

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