Disclosure: BIGG Digital Assets Inc. has paid FRC a fee for research coverage and distribution of reports. See last page for other important disclosures, rating, and risk definitions.
The analyst’s rating and fair value are one click away. Free FRC account, no credit card.
Already have an account?
Global crypto trading volumes have surged post-Q3, driven by higher crypto prices, and increasing prospects of global central bank rate cuts in the next six months. In November, BIGG’s trading volumes increased by 93% MoM to $43M. The global MCAP of cryptos is US$1.7T, up 91%YoY; global trading volumes are up 83% YoY.
In Q3, BIGG’s annualized revenue per user was up 1% QoQ to $20 (beating our estimate by 25%) vs $15 for COIN. However, Customer Acquisition Costs (CAC) remain highly volatile, and are significantly higher than revenue per user.
In Q4, we anticipate increased trading volumes to contribute to higher transaction revenue, and lower CAC. That said, sector risks remain high amid increased regulatory scrutiny, and volatile crypto prices.
We believe BIGG’s growing user-base, and U.S. expansion, will drive organic growth in the coming quarters. We continue to expect sectorwide consolidation. As a registered platform, BIGG stands out as an appealing M&A prospect.
BIGG’s trading platform, Netcoins, is available to users in Canada, and 17 U.S. states
Users can transact in up to 42 cryptos.
In Q3, trading volumes were up 5% QoQ, but fell short of our forecast by 18%
Revenue per user was up 1% QoQ, beating our estimate by 10%
Q3, trading volumes were up 5% QoQ, but fell short of our forecast by 18%
Customer Acquisition Costs (CAC) remain volatile, consistently outpacing revenue per user since Q4-2021
As global trading volumes have surged post-Q3, we anticipate a significant reduction in CAC in Q4
Our valuation hinges greatly on management's effectiveness in reducing CAC
Q3 revenue was up 7% YoY, but 2% lower than our estimate, attributed to lower than expected trading volumes
EBITDA was down 2% QoQ, and EPS was down 17% QoQ; both falling 1% below our estimated
Strong balance sheet, with no debt
FRC Projections and Valuation
We are not making changes to our near-term EPS forecasts
However, we are lowering our long-term revenue growth estimates due to rising competition; currently, there are 13 registered crypto platforms in Canada, up from <10 last year
As a result, our DCF valuation decresed from $0.59 to $0.53/share
The average sector EV/R (forward) is up 42% since our previous report in August 2023
BIGG is trading at a 38% discount
We are reiterating our BUY rating, and adjusting our fair value estimate from $0.51 to $0.47/share (the average of our DCF and comparables valuations). As global trading volumes have surged post-Q3, we anticipate robust performance in Q4. We continue to expect sector-wide consolidation, and view BIGG as an attractive M&A target. That said, sector risks remain high amid increased regulatory scrutiny, and volatile crypto prices.
Risks
We believe the company is exposed to the following risks (list is non-exhaustive):
