BTG resumes coverage of Méliuz (Cash3) with purchase recommendation after action jump 114% since the new Bitcoin strategy (BTC)

The actions of Méliuz (cash3) accumulate high than 110% since when the company of cashback adopted a treasury strategy of Bitcoin (BTC). And this Wednesday (25), the BTG Pactual launched a report resuming the role coverage with recommendation for buy.

Thus, BTG also raised the target price From shares to R $ 10.00, which represents a potential of 43% increase in relation to the closure of last Tuesday (24).

But after all, what excited analysts so much in the new thesis BITCOIN PARTING?

Coming back a few steps, the Méliuz announced in March this year the strategy of becoming a Bitcoin Treasury Company (In other words, a Bitcoin accumulation company, the largest cryptocurrency of the world and considered the “digital gold”).

Despite being a new type of business strategy – analysts themselves assume that they have been studying the model a few weeks ago – the report states that this is a “bet that is worth the risk”, among other things, the potential for valuing Bitcoin.

“Our initial reaction to the ad [de acumulação de BTC] It was by surprise and skepticism, ”written analysts Ricardo Buchpiguel, Eduardo Rosman and Thiago Paura, who sign the report.

“However,” they continue, “with the appreciation of 114% of the action Since the strategy was revealed, it was clear that we were losing something. ”

Méliuz (Cash3) and Bitcoin (BTC): A ray in business

According to analysts, Méliuz’s investment strategy consists of four fundamental pillars – evidently being the performance of Bitcoin the main one.

The others are:

1. The evaluation of your business of cashback already existing;
2. The high volatility of actions Cash3;
3. And the company’s ability to issue debt or hybrid instruments (such as convertible debentures or preferred actions) Bitcoin (BTC).

In the case of BTG, analysts take into account mainly the performance of Bitcoin, the existing business evaluation and the volatility of actions in their models.

Starting with valuationthe business of cashback is valued at $ 400 million, approximately 6x the company’s value on the EBITDA (EV/EBITDA).

In analysts estimates, the unit should lose relevance with increasing Bitcoin strategy participation over time.

As for the volatility of the papers, BTG points out that Bitcoin Treasury Company “They sell varied volatility and exhibitions to the BTC”.

“Unlike traditional companies, these companies generate value not from central operations, but increasing the number of bitcoins per share (BTC/Action) through the issuance of financial instruments – such as actions, convertible debentures, preferred actions and Warrants”They write.

Volatility and asymmetry

Thus, the high volatility of the actions of these companies implies the sale of these instruments linked to options in more favorable terms for the company.

Using as an example the Strategy (Former Microstrategy), The company often issues convertible debentures with interest close to zero and high options exercise prices.

“As some investors seek exposure to Bitcoin with safeguards, they are willing to buy these convertibles – even if it means giving part of BTC’s own discharge potential.”

Ultimately, these listed companies use their public status to offer structured exposure to Bitcoin through various risk profiles, while capturing value of each issue.

The risks of Méliuz’s Bitcoin strategy

As expected, poor bitcoin performance can put the Méliuz strategy. Still, analysts say that everything can collapse if any of the previously weakened pillars are weakened and is not compensated by strength in others.

“Thus, if Bitcoin performs bad performance in the coming years, the investor would not only be exposed to a depreciation asset, but the company could also not be able to issue new debt instruments – which means the investor would have paid a prize of MNAV Without reaping the benefits of BTC performance, ”they write.

Remember that the MNAV and the Multiple of Net Asset Valuecomparing the company’s market value to the market value of its bitcoin in custody.

Thus, analysts do not rule out the possibility that the company cannot raise capital to buy more bitcoins, which would break the central logic of the model. And, of course, it is almost impossible to predict the price of the BTC for sure.

Still, Méliuz does not face a risk that Strategy itself faced with the bear market From Bitcoin in 2022, which is to be forced to sell their participation in low prices cryptocurrency.