CoinShares — Strong earnings and new activities in Q421

CoinShares International (OMX: CS)

Last close As at 20/05/2024

SEK63.90

−2.70 (−4.05%)

Market capitalisation

SEK4,350m

More on this equity

Research: Financials

CoinShares — Strong earnings and new activities in Q421

CoinShares International (CS) continued to broaden its business model by 1) entering the business to customer (B2C) segment with the acquisition of Napoleon Crypto, 2) commencing decentralised finance (DeFi) yield farming operations, as well as 3) launching new exchange traded products (ETPs). CS’s new investments (both in new business verticals and capital markets activities) are fuelled by strong cash generation, primarily from XBT Provider unit redemptions and CSCM gains (with FY21 cash inflows of £28.8m and £62.2m, respectively). While digital asset prices have retraced visibly from the November 2021 highs, we see continued signs of mainstream crypto adoption, representing an important secular tailwind.

Milosz Papst

Written by

Milosz Papst

Director, Financials

Financials

CoinShares International

Strong earnings and new activities in Q421

Q421 results

Financials

17 March 2022

Price

SEK76.4

Market cap

SEK5,183.8m

SEK12.3813/£

Gross cash (£m) at end-FY21 (excluding CSCM liquid position)

11.1

Shares in issue

68.2m

Free float

28.7%

Code

CS

Primary exchange

Nasdaq First North

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

7.9

(8.6)

(27.9)

Rel (local)

11.8

1.9

(29.6)

52-week high/low

SEK123.0

SEK60.8

Business description

CoinShares International develops innovative infrastructure, financial products and services for the digital asset class. It manages and provides liquidity for exchange traded products and undertakes proprietary trading in digital assets. It recently acquired a blockchain equity index business.

Next events

Q122 results

3 May 2022

FY21 report

31 May 2022

Analyst

Milosz Papst

+44 (0) 20 3077 5700

CoinShares InternationalCoinShares International is a research client of Edison Investment Research Limited

CoinShares International (CS) continued to broaden its business model by 1) entering the business to customer (B2C) segment with the acquisition of Napoleon Crypto, 2) commencing decentralised finance (DeFi) yield farming operations, as well as 3) launching new exchange traded products (ETPs). CS’s new investments (both in new business verticals and capital markets activities) are fuelled by strong cash generation, primarily from XBT Provider unit redemptions and CSCM gains (with FY21 cash inflows of £28.8m and £62.2m, respectively). While digital asset prices have retraced visibly from the November 2021 highs, we see continued signs of mainstream crypto adoption, representing an important secular tailwind.

Year end

Revenue
(£m)

Adjusted EBITDA* (£m)

Adjusted EPS** (p)

DPS
(p)

P/E
(x)

Yield
(%)

12/20

18.4

22.1

0.28

0.0

22.0

0.0

12/21

80.9

121.7

1.64

0.0

3.8

0.0

12/22e

81.3

88.9

1.03

0.0

6.0

N/A

12/23e

82.5

92.9

1.10

0.0

5.6

N/A

Note: *Sum of revenue, income and gains from capital markets infrastructure and gains on principal investments less administrative expenses excluding D&A. **Total comprehensive income (excluding currency translation differences and fair value gain/(loss) on investments recognised in other comprehensive income) per share attributable to shareholders of the parent.

Multiple earnings contributors in Q421

CS reported a healthy adjusted EBITDA of £32.9m in Q421 versus our estimate of £25.7m, which was significantly ahead of the £7.8m booked in Q420. This was a combination of record-high quarterly management fees from ETPs (XBT Provider products in particular) amid high digital asset prices (translating into CS’s total assets under management of £4.2bn at end-2021) and solid gains from its existing capital markets activities (CSCM), further assisted by the launch of DeFi yield farming activities (which contributed £3.6m in Q421).

Strategic move into the B2C business

CS’s strategic priority is to leverage its proprietary tech infrastructure (providing connectivity to a large number of trading venues) to support a variety of services, ranging from B2B2C (such as its existing ETP offering), through a B2B licensing model (platform-as-a-service) to customer solutions. It considers the acquisition of Napoleon as an important step into the B2C, subscription-based business model providing direct access to customers, thus allowing CS to better understand their needs and drive an enhanced user experience.

Valuation: Offering a 53% upside potential

Our updated CS valuation based on our base case scenario (accounting for the lower near-term digital asset price assumptions, higher expected CSCM gains, stronger US dollar and the acquisition of Napoleon) stands at SEK117.2 per share (slightly down from SEK119.8 previously). We have also updated our ‘Crypto Winter 2022’ scenario, which now indicates a fair value per share of SEK72.9 (unchanged from our previous valuation).

Q421 results: Multiple earnings drivers

We consider CS’s total comprehensive income and adjusted EBITDA as more relevant than its reported net income (see our initiation note for details). CS reported total comprehensive income of £29.5m in Q421, ahead of our estimate of £23.7m and significantly above the £6.2m in Q420 (see Exhibit 1). The company has consistently delivered strong performance in each quarter throughout FY21, with the Q421 figure being ahead of both Q221 and Q321 (£26.6m and £26.2m, respectively), and only slightly below the particularly strong £32.1m in Q121. This brings its FY21 total comprehensive income to £114.3m, a more than sixfold increase from £18.6m in FY20.

CS also started reporting an adjusted net income (included in an alternative statement of comprehensive income), which is broadly similar to its total comprehensive income under IFRS but excludes currency translation differences and fair value gain/(loss) on investments (which are part of the other comprehensive income under IFRS). This non-IFRS net income stood at £110.5m in FY21 compared to £20.4m in FY20.

Exhibit 1: Q421 results highlights

£m, unless otherwise stated

Q421

Q421e

diff

Q321

Q221

Q121

Q420

Revenue, of which:

25.8

22.5

14.6%

18.4

19.6

17.1

7.1

XBT Provider

24.4

21.5

13.4%

17.5

19.5

17.0

7.1

CoinShares Physical

0.5

0.4

11.9%

0.2

0.1

0.1

-

CoinShares Global Blockchain Equity Index

0.6

0.5

8.8%

0.6

-

-

-

B2C (Napoleon)*

0.3

N/A

N/A

-

-

-

-

CSCM income/gains, of which:

16.2

8.6

89.0%

8.4

14.7

22.8

5.2

Liquidity provisioning

2.4

2.0

21.5%

1.7

3.3

6.3

1.8

Delta neutral trading strategies

5.3

3.0

76.6%

2.6

9.1

10.1

1.8

Fixed income activities

3.5

3.1

12.1%

3.1

1.7

2.7

1.6

DeFi

3.6

-

N/A

-

-

-

-

Other

1.5

0.5

193.0%

1.0

0.5

3.6

0.1

Principal investment gains/(losses)

0.7

1.3

-49.6%

4.8

4.1

(0.0)

(0.4)

Adj. administrative expenses

(10.0)

(6.7)

48.0%

(5.7)

(9.7)

(5.7)

(4.2)

Adj. EBITDA

32.9

25.7

28.1%

26.0

28.6

34.2

7.8

Adj. EBITDA margin

77.0%

79.3%

-2.2 pp

82.0%

74.7%

85.6%

64.9%

Depreciation and amortization

(0.5)

(0.5)

9.1%

(0.5)

(0.1)

(0.0)

(0.1)

Finance expense

(2.9)

(1.5)

93.7%

(1.5)

(1.6)

(0.7)

(0.4)

Income taxes

0.3

-

N/A

(0.4)

(0.3)

(0.9)

1.6

Currency translation differences

(0.4)

-

N/A

2.6

(0.1)

(0.4)

(2.9)

Total comprehensive income

29.5

23.7

24.1%

26.2

26.6

32.1

6.2

Adjusted net income

29.7

22.4

32.2%

N/A

N/A

N/A

N/A

Source: Company data, Edison Investment Research. Note: *Acquired in December 2021.

Record fees in Q4 assisted by favourable digital asset prices

Asset management fees reached a record-high level of £25.5m in Q421 versus £7.1m in Q420 and were still largely driven by CS’s legacy XBT Provider products (£24.4m), with CoinShares Physical and the CoinShares Global Blockchain Equity Index contributing a further £0.5m and £0.6m, respectively. The improvement in fee revenue versus that achieved in each of the previous quarters of FY21 was assisted by higher average assets under management, which reached c £4.2bn at end-December 2021 versus £3.7bn at end-September 2021 (despite the sell-off in crypto markets, which started around mid-November 2021), primarily due to the rising price of Ether in Q421. We also note that due to sizeable XBT Provider redemptions amid profit taking by noteholders (see below), CS collected £28.8m in cash, which mostly represents accrued management fees. Following the acquisition of Napoleon in December 2021, the company recognised first subscription-based revenues from this business at £0.3m during the quarter.

CSCM delivering income/gains on multiple fronts including DeFi

CSCM has also performed well with total income/gains of £16.2m in Q421, ahead of our estimate of £8.6m and the £5.2m posted in Q420. Its delta neutral (ie non-directional) strategies generated a gain of £5.3m in Q421 (£1.8m in Q420) as CSCM continues to benefit from the volatility in digital assets. While the result is somewhat lower than the exceptionally strong gain in Q121 and Q221 (which saw a particularly high level of market activity and volatility), it is visibly ahead of the Q321 figure of £2.6m.

As highlighted in our previous update note, CS started to engage in yield farming in the decentralised asset space, in particular from activities in peer-to-pool lending protocols (such as Compound, Aave and Maple Finance) and liquidity provisioning on decentralised exchanges. Based on our discussion with management, we understand that CS is deploying a diverse range of DeFi strategies (including straight lending/liquidity provisioning, liquidity mining of tokens, as well as arbitrage strategies) across multiple blockchains. DeFi was a considerable contributor to CSCM gains in Q421 with £3.6m (nil in Q420); according to management the average annualised percentage yield achieved on these activities was c 12.0–12.5%. We believe this illustrates the company’s expertise in pursuing new profitable opportunities arising in the rapidly evolving digital assets sector. Interestingly, apart from being active on lending platforms dominated by retail borrowers, CS also provided liquidity to market makers and clients through Maple Finance’s new institutional DeFi lending protocol. Moreover, CS supported the launch of Aave Arc, a permissioned lending protocol for financial institutions verified through a ‘know your customer’ procedure, designed to be compliant with anti-money laundering regulations.

Finally, CS achieved a y-o-y improvement in its result from liquidity provisioning related to the XBT Provider units and its fixed income activities (which are primarily reverse repo operations) to £2.4m and £3.5m in Q421, respectively. Overall, CS’s capital markets infrastructure operations delivered sizeable income and gains of £62.2m in FY21 (£16.8m in FY20), with US$32bn worth of notional traded (up 305% versus FY20) across 20 venues.

Q421 adjusted EBITDA of £32.9m close to the Q121 all-time high

CS’s gains on principal investments stood at £0.7m in Q421 (versus a £0.4m loss in Q420), assisted mostly by 3iQ (£1.6m revaluation gain) and Solana tokens (£0.5m), in part offset by a reduction in the value of Kingdom Trust (held indirectly through SBG, written down by £1.1m during the quarter). We note that after the balance sheet date, CS announced that it increased its stake in FlowBank from 9.02% to 29.3% (which represents voting rights equal to 32.06%) by investing CHF24.7m – see our initiation note for details on FlowBank.

The company’s administrative expenses excluding D&A rose to £10.0m in Q421 (and £31.1m in FY21) versus £4.2m in Q420. This was primarily the result of 1) higher custody fees associated with the higher value of digital assets held on behalf of XBT Provider and CoinShares Physical unit holders; 2) headcount increase to 80 at end-2021 versus 42 at end-2020; 3) professional fees incurred in preparation for the uplisting; and 4) increased accruals for staff payments as a function of group performance. Consequently, CS’s adjusted EBITDA reached £32.9m (close to the all-time quarterly high of £34.2m in Q121 and versus 7.8m in Q420), with an adjusted EBITDA margin of 77% (65% in Q420).

Net outflows from XBT Provider continue, while CoinShares Physical is ramping up

We estimate that the total AUM of Western European digital asset ETPs reached c US$9.7bn at end-2021, significantly up from c US$3.1bn at end-2020, with CS products having a c 50% share (vs c 74% at end-2020). According to CS’s Digital Asset Funds Flow Weekly report, the XBT Provider platform saw c US$1.15bn of net outflows throughout 2021 to 17 December (the date of the dataset included in the last available edition of the report for 2021), driven by profit taking from investors who purchased the units before 2021 (these products were introduced between 2015 and 2017). CoinShares Physical attracted c US$210m of net inflows (or US$485m including the seed assets provided by CS). Meanwhile, CS’s main European competitors, 21Shares and ETC Group, attracted c US$1,027m and US$685m of respective net inflows during this period. Here, it is important to note that (as highlighted last year by CS’s management) the XBT Provider products also experienced meaningful gross inflows during 2021 (even if these were more than offset by redemptions) and that the number of individual holders grew significantly (tripling from c 24k at the beginning of 2021 to 72k at the time of releasing the Q321 results). Moreover, CoinShares Physical was in a ramp-up stage as it was launched in early 2021, while the flagship ETPs of 21Shares were introduced in 2019 and ETC Group’s Bitcoin (BTC) ETP was launched in June 2020 (its Ethereum (ETH) ETP was launched in February 2021). In 2022 ytd (to 4 March 2022), net outflows for XBT Provider products continued with c US$209m, while CoinShares Physical saw a US$19m net inflow (21Shares saw ytd inflows of US$42m, while ETC Group experienced net outflows of US$139m).

Three new ETPs with staking yields launched so far in 2022

It is worth highlighting that the stronger net inflows of 21Shares in 2021 were partially supported by a high number of new single-asset ETP launches during the year, including some popular tokens such as Solana. CS has not launched any new ETPs between April and December 2021 (despite the quite receptive market), as management highlighted that it prioritises the design of products with the highest quality and transparency over seeking quick gains in terms of short-term AUM inflows. In Q421, the company received regulatory approval to add a further 46 digital assets to the main CoinShares Physical prospectus (bringing the total figure to 50). Consequently, in January 2022, CS launched two new single-asset ETPs under its institutional-grade CoinShares Physical platform, referencing the native tokens of Tezos (a smart contract-enabled blockchain competing with ETH) and Polkadot (an interoperability protocol). This was followed by the launch of an ETP tracking Cardano (the native token of another Ethereum contender) in March 2022.

The Tezos, Polkadot and Cardano blockchains are all based on proof-of-stake consensus algorithms and all three CS products were designed to offer a transparent mechanism for sharing rewards from staking (ie locking the digital assets on the blockchain as a kind of collateral to secure the network). This feature distinguishes CS’s new ETPs from similar products launched by its European competitors, which do not disclose the exact staking yield (if any) allocated to ETP investors. For CS’s products, the staking rewards are currently being distributed in two forms: through a reduction in management fee to 0.0% and a reward accruing daily to the value of the ETPs (3% pa for the Tezos and Cardano ETPs and 5% pa for the Polkadot ETP). CS will retain the balance of the generated staking rewards (current staking yields are c 5.4% for Tezos, c 5.3% for Cardano and 14.0% for Polkadot, according to stakingrewards.com). For now, these products represent a minor part of CS’s AUM at c US$8.7m combined as at 17 March 2022.

Supporting Invesco in its Bitcoin ETP launch

We also note that Invesco launched its first physical BTC ETP, with CS acting as index sponsor (the ETP will track CS’s Bitcoin Hourly Reference Rate Index) and execution agent. While this ETP (as well as a similar product recently introduced by Fidelity International) may be considered to be in direct competition to CS’s own Physical Bitcoin ETP, CS’s management highlighted that the Invesco Bitcoin ETP is aimed at attracting Invesco’s existing base of large institutional clients, which would anyway be difficult for CS to approach directly. By supporting Invesco in launching the product (which had an AUM of c US$123m as at 16 March 2022), CS will receive part of the fees charged to ETP holders.

Strategic expansion into B2C

During the preliminary FY21 earnings call, CS’s CEO provided an update on the strategic priorities of the business going forward. Firstly, CS’s emphasis will be on further leveraging the company’s unified technology framework (now called ‘Galata’) as a bridge to connect a wide range of clients operating in the traditional financial system to the digital asset ecosystem. Its strong and constantly developed technological backbone providing connectivity to a large number of trading venues will be used as the foundation for growing CS into a provider of 1) asset management solutions (B2B2C, such as its existing XBT Provider and CoinShares Physical platforms) deriving revenues from fees charged on AUM; 2) business solutions (B2B) with a licensing model (platform-as-a-service); and 3) consumer solutions (B2C) in a subscription-based (software-as-a-service) model.

The expansion into the B2C sector is of particular importance, as it should also allow CS to have a more direct interaction with retail customers and in turn improve the company’s understanding of their needs to drive an enhanced user experience of its products. CS recently entered the B2C sector by acquiring Napoleon, a French crypto-focused fintech company, which offers, among others, pre-built portfolios and algorithmic trading strategies. Napoleon’s software solution is a social trading platform in the form of a non-custodial meta layer that is venue-agnostic (ie can be used on top of a crypto trading venue’s app, for example Binance, Bitfinex, FTX and Bitstamp). Napoleon has a recurring, subscription-based revenue model, offering three packages at different price levels (Silver – €19/month, Gold – €50/month and Platinum – €99/month). The current average revenue per user (ARPU) at €87/month and its user base currently consists of 5,000 clients (90% of which are French), translating into an annualised revenue of c €5.0m. However, we note that the current customer lifetime value (LTV) stands at just €300 (implying a high monthly churn of c 29%).

CS aims to integrate Napoleon’s product with Galata to facilitate improved connectivity and optimal trade execution. It also intends to scale the business globally across other European countries, the United States and the Asia-Pacific region. Furthermore, it plans to improve both ARPU and LTV through a combination of customer education and better user experience. Finally, CS considers entering partnerships with existing exchanges, as well as co-marketing activities with local exchanges to drive customer acquisition in selected regions. CS acquired Napoleon for a total consideration of €13.9m as a combination of a partial equity swap (issuing c 363.6k at a price of €10.8 per share ie valued at c €3.9m) and cash.

Forecast revisions

Digital asset prices down from November 2021 peak

While CS reported strong Q421 numbers, we note that digital asset prices have significantly declined from the November 2021 peak, with BTC and ETH down c 40–45% (or c 50–55% from peak to the local trough in late January 2022). At this stage, we do not assume a crypto bear market like the one in 2008 in our base scenario given the continued progress in digital assets adoption and a return to net inflows to related investment products after a temporary period of net outflows in late-December 2021/early January 2022 (based on CS data). We also retain our expectations in terms of the global allocation to digital assets at 2.0% and 2.5% by 2025 and 2030 respectively. Nevertheless, we have reduced our near-term assumptions in terms of allocation to digital assets, which now imply a BTC price at c US$48,300 at end-2022 (US$63,600 previously and a current spot price of c US$40,700) and an ETH price of c US$3,700 at end-2022 (c US$4,200 previously and a current spot price of c US$2,750).

XBT Provider outflows may continue in the near term, CoinShares Physical inflows to steadily increase

The net outflows from XBT Provider products in Q421 and so far in Q122 are broadly in line with our expectations. Consequently, we have made only minor changes to our assumptions for the coming years. We now assume net outflows of US$0.9bn in FY22e and US$0.8bn in FY23e (US$1.0bn in both 2022 and 2023 previously). We consider the net inflows into the CoinShares Physical products as moderate so far, though we acknowledge that these were launched quite recently and that between December 2021 and February 2022 inflows were affected by the overall weaker sentiment towards crypto investments. We now assume net inflows of c US$250m and US$450m in FY22e and FY23e respectively (vs US$365m and US$550m previously). We have also reduced our AUM and management fee assumptions for the equity index. As a result of the above, we now forecast CS’s management fees in FY22e and FY23e at £76.4m and £76.2m compared to £100.1m and £94.6m previously.

Napoleon

We have now included revenues from the recently acquired Napoleon in our forecasts, assuming £4.6m in FY22e and £5.6m in FY23e (based on a customer base of 5.5k and 6.9k respectively, driven by intensified marketing activities). We also assume a moderation of monthly churn from the current c 29% to 10% by FY23e and 5% in the long term.

CSCM forecasts raised on the back of DeFi income

We have raised our forecasts for CSCM income/gains to £54.9m in FY22e (vs £41.5m earlier) and £60.3m in FY23e (vs £46.5m earlier), primarily to reflect income from CS’s recently initiated DeFi activities (we assume an income of c £17.5m pa in both FY22e and FY23e). We still cautiously do not include any profit/losses from CS’s principal investments going forward as we consider them difficult to predict. Hence, potential further profits in this segment constitute a potential minor value catalyst.

Exhibit 2: Summary of forecast revisions

 

FY21

FY22e

FY23e

FY24e

FY25e

£m

Actual

Old

New

diff

Old

New

diff

Old

New

diff

Old

New

diff

Revenue, of which:

80.9

100.1

81.3

-18.8%

92.9

82.5

-11.2%

94.6

94.3

-0.3%

102.2

111.6

9.2%

XBT Provider

78.5

92.9

71.0

-23.6%

79.8

64.3

-19.4%

71.2

62.4

-12.3%

62.9

61.6

-2.1%

CoinShares Physical and other*

0.9

4.6

3.6

-22.1%

9.9

9.9

-0.5%

19.6

21.4

9.4%

34.8

37.2

6.8%

CoinShares Global Blockchain Equity Index

1.2

2.6

2.1

-18.0%

3.2

2.7

-15.1%

3.9

3.3

-15.1%

4.5

3.8

-15.1%

B2C

0.3

0.0

4.6

N/A

0.0

5.6

N/A

0.0

7.2

N/A

0.0

9.0

N/A

Capital market infrastructure income/gains, of which:

62.1

41.5

54.9

32.4%

46.5

60.3

29.7%

51.7

65.5

26.8%

56.4

70.1

24.4%

Liquidity provisioning

13.8

11.2

12.2

9.1%

11.3

12.0

6.4%

11.2

11.2

0.6%

10.0

9.6

-3.5%

Delta neutral trading strategies

27.2

16.4

13.4

-18.5%

20.1

18.9

-6.2%

24.1

23.8

-1.0%

28.5

29.1

1.8%

Fixed income activities

10.9

11.6

9.8

-15.3%

12.7

9.9

-22.2%

14.0

10.0

-28.6%

15.4

10.1

-34.4%

DeFi

3.6

0.0

17.5

N/A

0.0

17.5

N/A

0.0

18.4

N/A

0.0

19.3

N/A

Other

6.6

2.3

2.0

-12.3%

2.3

2.0

-14.0%

2.4

2.0

-15.6%

2.5

2.1

-17.3%

Principal investment gains/(losses)

9.6

0.0

0.0

N/A

0.0

0.0

N/A

0.0

0.0

N/A

0.0

0.0

N/A

Administrative expenses excl. D&A

(31.1)

(34.6)

(47.3)

36.7%

(36.0)

(49.9)

38.5%

(39.3)

(54.5)

38.8%

(43.7)

(60.1)

37.6%

Adjusted EBITDA

121.7

107.0

88.9

-16.9%

103.4

92.9

-10.1%

107.0

105.3

-1.6%

115.0

121.7

5.8%

Adjusted net income

110.5

98.9

73.8

-25.3%

95.6

78.3

-18.1%

99.4

89.1

-10.3%

107.0

102.6

-4.1%

Source: Company data, Edison Investment Research. Note: *Includes fees from CoinShares Physical, Block index, 3iQ and Invesco.

As a result, we now expect CS’s EBITDA to reach £88.9m in FY22e and £92.9m in FY23e (vs £107m and £103.4m previously). Having said that, we note that fees generated on XBT Provider Trackers (which remain one of the key earnings drivers) are accrued until investors redeem the certificates, at which stage they are released in cash to CS. The company collected £28.8m in cash from XBT Provider products in FY21 (mostly from accrued management fees) and we expect this cash flow to remain strong in FY22e at £30.5m (our previous assumption was £20.4m) as investors who have invested before 2021 realise their gains amid the current unstable economic and geopolitical environment. Our valuation in SEK terms was supported by the strengthening of the US dollar since we last published in November 2021, translating into a 6% higher US$/SEK rate assumed in our forecasts. Consequently, we currently value CS at SEK117.2 per share (slightly down from SEK119.8 per share previously) based on our DCF model, representing c 53% upside potential. We have also updated our ‘Crypto Winter 2022’ scenario (see our initiation note for details), which now implies a CS value of SEK72.9 per share (unchanged from our previous valuation).

Exhibit 3: Financial summary

Year end 31 December

£000’s unless otherwise stated

FY18

FY19

FY20

FY21

FY22e

FY23e

FY24e

FY25e

INCOME STATEMENT

 

 

 

 

 

 

 

 

Revenues

10,549

11,331

18,389

80,892

81,294

82,477

94,307

111,639

Administrative expenses

(10,927)

(9,284)

(14,312)

(32,167)

(48,383)

(50,954)

(55,543)

(61,156)

Other operating income

4,811

529

607

11,427

11,770

12,123

12,486

12,861

Profit/(loss) on financial instruments

519,988

(64,553)

(1,398,436)

(2,236,196)

6,511

(739,588)

(694,056)

(867,178)

Realised gain/(loss) on investments

(1,074)

(405)

942

5,287

0

0

0

0

Adjusted EBITDA

12,993

11,171

22,113

121,688

88,904

92,903

105,316

121,676

EBIT

523,347

(62,382)

(1,392,810)

(2,170,757)

51,192

(695,942)

(642,805)

(803,833)

Finance income

693

931

3,793

10,905

9,814

9,912

10,011

10,112

Finance expense

(148)

(404)

(1,191)

(6,810)

(13,172)

(12,646)

(14,113)

(16,832)

Pre-tax profit

523,892

(61,855)

(1,390,208)

(2,166,662)

47,834

(698,676)

(646,907)

(810,553)

Income taxes

(230)

(269)

(401)

(1,284)

(870)

(917)

(1,031)

(1,172)

Net income

523,662

(62,124)

(1,390,610)

(2,167,946)

46,964

(699,593)

(647,938)

(811,726)

Total comprehensive income

14,407

8,914

18,419

114,346

73,813

78,291

89,124

102,623

Reported EPS (diluted, £)

N/A

N/A

(21.68)

(32.62)

0.66

(9.81)

(9.08)

(11.38)

Adjusted EPS (diluted, £)*

N/A

N/A

0.28

1.64

1.03

1.10

1.25

1.44

DPS (£)

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

BALANCE SHEET

 

 

 

 

 

 

 

 

Property, plant and equipment

214

376

223

510

510

515

525

542

Intangible assets

0

7

20

19,781

18,908

18,035

17,162

16,289

Investments

6,158

5,585

3,626

24,501

24,501

24,501

24,501

24,501

Long term receivables

15

323

329

581

581

581

581

581

Non-current assets

6,387

6,290

4,199

45,372

44,499

43,632

42,769

41,913

Trade and other receivables

9,350

27,011

62,274

1,075,971

1,052,282

1,224,544

1,493,231

1,771,794

Digital assets

217,521

427,524

1,826,695

2,736,481

2,540,624

2,950,849

3,648,645

4,358,932

Cash at bank

32,897

2,350

2,266

11,088

6,565

36,819

97,220

166,107

Amounts due from brokers

N/A

39,405

66,518

118,976

105,199

122,264

152,121

182,726

Current assets

259,767

496,290

1,957,752

3,942,516

3,704,669

4,334,476

5,391,217

6,479,559

Total assets

266,154

502,580

1,961,951

3,987,888

3,749,169

4,378,108

5,433,987

6,521,471

Share capital

2,214

2,215

31

34

34

34

34

34

Share premium

111

111

2,387

30,781

30,781

30,781

30,781

30,781

Other reserves

104,322

168,813

1,209,630

667,846

694,695

1,472,579

2,209,641

3,123,990

Retained earnings

(68,003)

(125,795)

(1,155,551)

(497,727)

(450,763)

(1,150,356)

(1,798,294)

(2,610,019)

Total equity

38,644

45,343

56,497

200,934

274,747

353,038

442,162

544,786

Trade payables and other liabilities

227,469

419,340

1,792,936

3,491,612

3,193,402

3,711,452

4,617,784

5,546,808

Amounts due to brokers

N/A

37,631

112,121

292,708

281,019

313,618

374,040

429,878

Current tax liabilities

42

266

398

2,635

0

0

0

0

Current liabilities

227,510

457,237

1,905,454

3,786,955

3,474,422

4,025,070

4,991,824

5,976,686

Non-current liabilities

0

0

0

0

0

0

0

0

Total equity and liabilities

266,154

502,580

1,961,951

3,987,888

3,749,169

4,378,108

5,433,987

6,521,471

Ratios

 

 

 

 

 

 

 

 

Adj. EBITDA margin

52.1%

54.0%

62.8%

85.1%

65.3%

65.1%

65.9%

66.9%

Adj. net margin

59.4%

38.4%

47.6%

80.0%

54.2%

54.8%

55.8%

56.5%

ETP management fee (% of average AUM)

2.5%

2.5%

2.5%

2.3%

2.2%

2.1%

2.0%

1.9%

Source: Company data, Edison Investment Research. Note: *Total comprehensive income (excluding currency translation differences and fair value gain/(loss) on investments recognised in other comprehensive income) per share attributable to shareholders of the parent.


General disclaimer and copyright

This report has been commissioned by CoinShares International and prepared and issued by Edison, in consideration of a fee payable by CoinShares International. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by CoinShares International and prepared and issued by Edison, in consideration of a fee payable by CoinShares International. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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