Additions to crypto basket; JD Logistics rides the e-commerce bonanza

Additions to crypto basket; JD Logistics rides the e-commerce bonanza

Equities 6 minutes to read
PG
Peter Garnry

Head of Equity Strategy

Summary:  May has been tough for cryptocurrencies and our crypto basket has also suffered, but much less than cryptocurrencies themselves, making it the worst performing theme in May. We are adding five new companies to our crypto and blockchain theme basket including the Swedish-based crypto broker Safello Group that has just IPO'ed in Stockholm. JD Logistics have just IPO'ed in Hong Kong providing investors with a pure play on logistics in China which is essentially a play on e-commerce but from a different angle than the typical retailing perspective.


Our crypto and blockchain theme basket has been the worst performing basket this month down 18.1% as cryptocurrencies have experience extreme volatility and an intra-month maximum drawdown of 49.6% in Bitcoin (see chart). The divergence in performance between Bitcoin prices and the crypto theme basket shows that the companies in the basket are not purely driven by cryptocurrency prices. This means that our theme basket provides a different exposure profile to the crypto industry than just speculating on cryptocurrencies.

Source: Bloomberg

Safello Group, which is Swedish-based crypto broker, recently IPO’ed in Stockholm, and we are using this IPO as an opportunity to add some new companies to our theme basket. In this update we are adding the five companies Safello Group, Northern Data, Quickbit, Taal Distributed, and Digihost expanding the theme basket to 23 companies representing $97.7bn in combined market value. As the table shows, the median price target is 56% above the current price suggesting that analysts remain very bullish on this industry despite the recent volatility. We do not have a firm view on this industry except that outright speculation is for now the main activity in cryptocurrencies and that the industry still need to prove that it can be other than pure speculation.

NameSegmentMarket Cap (USD mn.)Sales growth (%)P/BDiff to PT (%)5yr return
Coinbase Global IncCrypto exchange51,558139.348.557.9NA
Signature Bank/New York NYBank14,4082.52.216.492.4
Galaxy Digital Holdings LtdCrypto services6,009NA3.873.61,115.4
MicroStrategy IncInvestment firm4,8132.013.239.7158.7
Marathon Digital Holdings IncCrypto mining2,570735.03.887.7-39.7
Riot Blockchain IncCrypto mining2,398322.16.528.1846.0
Silvergate Capital CorpBank2,990NA4.135.6NA
Voyager Digital LtdCrypto broker2,98213,223.929.864.0NA
Canaan IncInfrastructure1,571-68.5313.4NANA
Monex Group IncFinancial institution2,02847.02.5-1.2245.3
Hive Blockchain Technologies LtdCrypto mining1,00712.516.5NANA
Argo Blockchain PLCCrypto mining848120.019.553.4NA
Hut 8 Mining CorpCrypto mining542-26.82.1109.9NA
Bit Digital IncCrypto mining456NA0.0NANA
Bitfarms Ltd/CanadaCrypto mining6497.025.847.9NA
Bitcoin Group SECrypto broker248-44.46.7NANA
Future FinTech Group IncBlockchain e-commerce227-81.54.2NA79.8
DMG Blockchain Solutions IncInvestment firm125NA12.4NANA
Safello Group AB (*)Crypto broker5749.4NANANA
Northern Data AG (*)Infrastructure1,793253.710.869.8NA
Quickbit EU AB (*)Crypto payment services137NA4.3NANA
Taal Distributed Information Technologies Inc (*)Blockchain platform134NA3.060.8310.9
Digihost Technology Inc (*)Crypto mining125NA2.3NANA
Aggregate / median97,67729.85.455.6202.0

Source: Bloomberg and Saxo Group
* Added to theme basket on 28 May 2021
** Infrastructure segment means physical computing applications for crypto mining

How much more upside is there in logistics?

The logistics industry is enjoying rapid growth these days with container freight rates and shipping companies rallying again this year (listen to today’s podcast for more colour on these topics). JD Logistics, a logistics spinoff from the Chinese e-commerce giant JD.com, had its first day of trading today in Hong Kong following its $3.2bn IPO capitalizing on the trend of rising profitability and growth. The company grew revenue 47% y/y in 2020 to $10.6bn and EBITDA to $903mn with the EBITDA margin expanding 3.2%-points and is for now a pure play on Chinese logistics which is expected to continue growing rapidly over the coming years as e-commerce continues to grow in China.

We are planning to launch a logistics theme basket next week and we have previously written about the industry highlighting that it has delivered outperformance against the general equity market for over a decade. It seems there are some intrinsic dynamics in the logistics industry that creates a lot of shareholder value. The L&G E-commerce Logistics ETF is up 128% from the lows last year highlighting the massive inflow of capital into this theme. Given the outlook on global supply chain bottlenecks which are expected to last at least the rest of this year, we have a positive view on logistics companies.

Source: Saxo Group
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