A report from BHM Capital suggests that Phoenix Group is poised for significant growth through an aggressive expansion strategy. The report sets a 12-month price target of AED 2.37 on the stock, suggesting a potential upside of 48.3%. With a solid financial position, strategic acquisitions, and a focus on large and efficient mining, Phoenix is ââwell positioned to become a major player in the global Bitcoin mining market, especially in the MENA region.
Intensive expansion and mining efficiency
BHM Capitalâs analysis highlights Phoenix Groupâs current operation of 750 MW of mining capacity across several key regions, including the MENA region, the Americas, and the CIS. The company plans to expand to 1,265 MW of electricity by 2025, with 500 MW of that capacity allocated to the MENA region. By 2026, the company aims to reach 4-5% of global Bitcoin mining capacity.
Phoenix Groupâs use of modern ASIC equipment and focus on securing low-cost power sources, particularly in regions such as Oman and the UAE, positions the company to maintain profitability even in volatile Bitcoin price environments. The report underscores Phoenixâs strategic power cost advantages, which average 5.2 US cents per kilowatt-hour, a competitive advantage in the global mining market.
Blockchain Partnership: UAE Dirham-Pegged Stablecoin with Tether
In addition to its mining operations, Phoenix Group has announced a partnership with Tether to launch a stablecoin pegged to the UAE dirham. The partnership marks a significant step in Phoenixâs strategy to expand its blockchain operations and drive adoption in the UAEâs digital finance ecosystem. The AED-pegged stablecoin aims to provide a secure and transparent option for cross-border transactions, positioning Phoenix as a leader in the growing digital asset market in the MENA region.
This partnership is expected to strengthen Phoenixâs presence in the region, offering an effective alternative to cryptocurrency that complements its crypto mining and trading activities.
Diverse revenue streams: mining, hosting, trading
The BHM Capital report points to Phoenix Groupâs diversified business model, which includes:
Self-mining (55.7%): This segment is expected to grow to 74% of total revenue by FY27 as Phoenix continues to invest in high-margin self-mining operations.
Hosting Services (34.3%): Phoenix provides hosting services to third parties, ensuring stable revenue through long-term contracts.
Trading (9.8%): Phoenix is ââan exclusive distributor of mining equipment in the MENA region, working with major players such as Bitmain and MicroBT.
This diversification reduces Phoenixâs exposure to Bitcoin price volatility, while providing flexibility to optimize revenue across different market cycles.
Financial strength and attractive valuation
Phoenix Group has a strong financial position, as highlighted in the BHM Capital report. With cash reserves and digital assets in excess of $333 million, Phoenix has a strong balance sheet and cash flow generation capacity, making it an attractive investment. Phoenix is ââundervalued compared to its peers in the global mining sector, and BHM Capital expects significant earnings growth driven by capacity expansions and favorable Bitcoin price conditions.
Benefiting from the MENA regionâs crypto-friendly environment
Phoenix Groupâs strategic presence in the MENA region is the cornerstone of its growth plan. The BHM Capital report highlights the advantages that make the UAE and Oman attractive for crypto mining, such as low energy costs and supportive regulatory frameworks. Partnerships such as its joint venture with Green Data City in Oman underscore the companyâs commitment to exploiting these advantages. The companyâs recent acquisition of M2 trading platform and its blockchain gaming partnerships put it in a leading position to capitalize on the growing digital asset space in the region.
Risks and opportunities
Despite Phoenix Groupâs strong growth potential, there are some risks to consider. The companyâs earnings are highly correlated with Bitcoin price volatility, and any significant drop in Bitcoinâs price below $50,000 could negatively impact earnings. Additionally, energy price fluctuations and regulatory changes could pose significant challenges. However, the companyâs expansion plans, investment in self-mining, and strong financial position position it for significant growth. With Bitcoin prices expected to rise after the second half of 2024, Phoenix is ââwell positioned to capitalize on the next wave of crypto growth.
Promising investment opportunity in the field of digital currency mining
BHM Capital concludes that Phoenix Group represents a promising investment opportunity in the cryptocurrency mining sector, thanks to its strategic location in the region, its ambitious plans, and the expected rise in Bitcoin prices. With a price target of AED 2.37 per share, the company presents an attractive opportunity for investors looking to enter this sector.
