Bitdeer Technologies Group BTDR (NASDAQ), a prominent player in the Bitcoin mining industry, stands at the intersection of cutting-edge technology and financial innovation.
This is a syndicated guest post by LSTMaximalist, which was originally posted on his Substack.
As the crypto market continues to evolve, Bitdeer has strategically positioned itself to capitalise on the increasing demand for blockchain infrastructure. With a diversified business model that includes Self-Mining, Cloud Hash Rate, and various hosting services, Bitdeer leverages the power of decentralized networks to offer scalable solutions to a global clientele. Despite its expansion into ancillary services, Bitcoin mining remains the cornerstone of Bitdeer’s operations, driving a substantial portion of its revenue and underscoring the company’s deep-rooted commitment to the crypto space. As we analyze Bitdeer’s financials, it is essential to understand how the balance between core operations and diversification influences its overall performance in a highly competitive and volatile market.
The performance of Bitdeer on the stock market this year has been weak, in line with its competitors. During the second quarter of the year, we did observe some recoveries among mining companies, which was also a result of their significant reliance on Bitcoin’s performance. Nevertheless, this year has been lacklustre and raises an important question: is Bitdeer currently being traded at a discount or its fair value?
Bitdeer Q2 Earnings
- The debt-to-equity ratio continues to rise.
- The company has returned to recording losses.
- Stocks underperformance compared to competitors.
The company’s most recent second-quarter results once again revealed losses, despite a continued increase in revenue. In the first quarter of the year, the company managed to return to profitability, albeit with modest gains.
However, there are clear reasons for the company’s weak profitability despite the ongoing revenue growth. The company has consistently invested heavily in R&D to diversify its revenue streams and enhance operational efficiency.
Bitdeer’s debt has increased significantly due to several factors outlined in the quarterly report. The company expanded its loans to finance growth in its mining operations, particularly with the development of new datacenters and the acquisition of mining equipment. Additionally, Bitdeer issued new debt through warrants and raised capital by issuing shares, which is reflected in the increase in revenue from financing activities. These measures were essential to support its growth strategy and enhance its mining capacity and technological infrastructure.
At the same time, when we examine financial ratios such as the Debt-to-Equity ratio, it is evident that the company is highly leveraged and continues to rely on debt rather than equity to finance its operations and expansion. A high and rising debt-to-equity ratio generally increases financial risks and could, potentially, lead to liquidity or even solvency issues, in the future.
Moreover, spending on R&D continues to escalate, with current investment levels standing at approximately 46 million USD.
Sources of incomes – Breakdown
Mining continues to represent a significant portion of the company’s revenue, and its exposure to potential changes in the cryptocurrency market makes the company highly vulnerable to external factors beyond its control.
How is the Bitdeer positioned against its competitors?
We have already observed that, in terms of stock market performance, it lags behind almost all of its competitors. But how does it compare in terms of financial metrics?
We have gathered some multiples and financial ratios that help us understand the company’s position within the sector and in comparison to its competitors.
- EPS (Earnings Per Share)
- P/E (Price-to-Earnings Ratio)
- EG (Earnings Growth)
Bitdeer Technologies Group shows significantly lower EPS compared to the sector average, indicating weaker profitability. Despite higher P/E ratios, suggesting potential overvaluation, the company’s earnings growth is inconsistent and generally underperforms. Also, revenue growth lags behind the sector, highlighting slower expansion.
Overall, these metrics suggest that Bitdeer is struggling financially compared to its competitors.
In the end, what matter is Bitcoin Price
If we analyse the company’s stock performance (which is also evident in its competitors), we observe a very strong correlation with the price of Bitcoin. In this case, the price of Bitcoin (BTC) has a direct impact on the company’s stock behaviour.
In addition to the impact on the company’s stock performance, the effect on its revenues is also evident. Revenues tend to be significantly affected during prolonged sell-off periods and are boosted during bull markets, although mining becomes increasingly difficult over time due to the BTC Halving (which occurs every four years).
Miners are “extremely underpaid” due to current market conditions, as indicated below. This has a significant impact since mining is the core business of the company, which does not present a very optimistic outlook for Bitdeer’s stock price.
The miner capitulation risk tool is a two-part model, which seeks confluence between implied miner income stress (Puell Multiple), and observed hashrate decline. It highlights periods where there is an elevated risk of capitulation in the mining industry, which may lead to the release of additional BTC volume from distressed miner balance sheets.
Is Bitdeer currently trading at a discount or a premium relative to its intrinsic value?
Even though Bitcoin’s performance has a strong impact on the company’s stock price, it is not the only factor at play, as the company has been expanding its business model into other areas, despite its significant exposure to mining.
The company has allocated a substantial portion of its resources to fuel its R&D efforts, and the increase in debt relative to equity represents its long-term strategy.
At this point, if we analyse the company’s intrinsic value along with the promising prospects for Bitcoin, we can say that the company might currently be trading at a discount.
Moreover, when we apply conventional models of Discounted Cash Flow (DCF) and Relative Valuation, we conclude that the stock price is being traded at a 5% discount.
The intrinsic value of one BTDR stock under the Base Case scenario is 6.91 USD. Compared to the current market price of 6.54 USD, Bitdeer Technologies Group is Undervalued by 5%.
This is a guest post by LSTMaximalist and does not reflect the opinions and views of Blockspace Media. Nothing in this post should be misconstrued as financial advice.
