Andreas Eriksson | 2022-06-01 09:30
Turbulence going into 2022Despite having had great success in 2021, where Hilbert Groups Digital Asset Fund (HDAF) outclassed Bitcoin (+203% vs +46%), the start of 2022 has been quite different. While most asset classes have shifted into bear market territory in response to higher interest rates, rampant inflation and Russia’s war in Ukraine, digital assets have been hit the hardest with Bitcoin down almost 60% from the all-time high in 2021 and the complete collapse of Terra’s crypto currency, Luna, that’s down 99,9% from ATH in early April. So, while Hilbert’s Q1 revenue of SEK 3,8m came in a bit below our estimate of SEK 5,4m, is not all that bad considering the challenging environment.
Attractive valuations of analytics websitesThe progress of analytics website Coin360 has continued in a rapid pace. Employee count is up from two a year ago (when Hilbert invested) to 25 today, including sales, product owners and developers. We expect this number to reach 30 before year end. Monthly visits are at around 5 million and the building of a strong community paves the way for becoming the Bloomberg for digital assets, offering both retail and professional subscriptions. We estimate revenue potential to be over SEK 50m after full service launch in 2023. Similar websites, like Dune Analytics and Nansen enjoy valuations of USD 1 billion and USD 750m respectively, despite having lower traffic numbers than Coin360.
Long term value intact despite short term setbacksAs the second quarter has seen its own setbacks, where Bitcoin and Ethereum has contiuned downwards (Bitcoin traded at around USD 40,000 in early May and now just over USD 29,000), we find it likely that this will show in the performance and inflow to the asset management business in Q2 as well. With the launch of the third fund, with a market neutral strategy, the appointment of a CEO of asset management, as well as business developers fully focussed on increasing AUM, we believe the AUM will see a boost in the second half of 2022, provided that market conditions stabilize. All in all, our revised estimates for full-year fund performance and inflows where EBIT 2023E drops to MSEK 63 (MSEK 93), now motivate a fair value of SEK 14-17 (SEK 20-24) per share, which hinges upon an expectation of a long term recovery in the crypto market. Although it is difficult to assess the short term price development, Bitcoin has a proven track record of bouncing, as it is currently trading at 6x the levels of the low in March 2020.
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