There’s no doubt the financial zeitgesit is swirling around blockchain technology and digital currencies, with one Perth-based company listed on the local stock market looking to cash in on the crypto craze.
Shares in Digitalx Ltd (ASX: DCC) have gone from around 4 cents this time last year to 21 cents today and even traded around 40 cents at the start of 2018.
Digitalx owns and actively trades digital currencies such as Bitcoin, Ethereum, Coin Poker and Etherparty, with some of its valuation linked to the rise and fall of these currencies’ valuations apropos of the firm’s trading activities.
It also reports that most of its cash inflows are the result of fees earned for initial coin offering (ICO) advisory work alongside blockchain consulting.
In fact for the quarter ending March 31 2018 the group raked in US$1.7 million in fees, with some remarkably small operating costs helping it post an operating cash profit of US$894,000.
Zooming out to the the nine months ending March 31 2018 the group reported an operating cash profit of US$1.34 million thanks again in part to some low looking operating costs.
The company has 550 million fully diluted shares on issue, which means investors are giving it a market value around $A115 million at 21 cents a share today.
Apart from the ICO work the group boasts that it’s also building a blockchain consulting business, where for example it advises a company on how blockchain technology could improve its business.
Digitalx has also setup an online currency funds management business that invests in the top 10 crypto currencies on a weighted by market cap basis in order to mimic index-tracking share funds in the crypto world.
All this sounds exciting on paper, but this is a company for crypto evangelists only.
In my opinion the company’s cost base is also remarkably low with staff costs for the last quarter coming in at just over US$60,000 a month. In other words investors should be wary that it’s likely to have to invest more to earn more fees, while its current cost base works overtime to bring in the fees.
As such I’m not a buyer of Digitalx shares, although it’s sure to excite some punters given its leverage to crypto-mania.
Other companies on the local market that might be a better bet due to their potential to leverage blockchain technology include the bourse’s operator ASX Ltd (ASX: ASX) and online travel business Webjet Limited (ASX: WEB).
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You can find Tom on Twitter @tommyr345
The Motley Fool Australia owns shares of ASX Limited. The Motley Fool Australia has recommended Webjet Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.