Bitdeer: The Most Undervalued Miner?

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Assalamu alaikum everyone.
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I hope you are doing well.
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So rather than spend today telling you why you shouldn't worry about macro, I'd like to share with you what I like to do when macro is looking bleak.
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And that is to focus on the positions that I hold and whether or not I still believe in those positions and why I bought them in the first place.
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And today I'm going to go over bit deer, bit deer had their or released their August update.
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And so I'm going to dive in the numbers today and tell you why I think that this is a pretty attractive opportunity.
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So without further ado, let's get started and be sure to leave a like if you enjoy this video.
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If you get some value from it, be sure to leave a like.
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Alright, so enough of the broader market, you can see S&P is down Dow Jones is down.
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Not too much NASDAQ is up.
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Let's call it flat.
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But we're going to focus on what we are invested in.
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So share this screen.
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Alright, so bit deer announced it's August 2024 production in operation update.
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It mined 166 Bitcoin, which was down a bit.
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They have their reasons.
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So client hosted mining machines decreased due to transition of hosting customers and Texas 100 megawatt hydro cooling conversion.
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Their release capacity will be steadily refilled with new customer miners, as well as bit deers seal miners for self mining from September 2024 to Q1 2025.
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Very important here.
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One of the big reasons why I hold bit deer is because of their mining rigs or their project to create or manufacture their own mining rigs and their own mining chip, which sets it apart from other miners and gives it vertical integration that other miners lack.
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This vertical integration is going to come in handy when the bull market for Bitcoin resumes and earnest and the manufacturers of mining rigs start taking advantage of the higher demand for their rigs, pricing their rigs at higher prices and eating into the profits or would be profits of Bitcoin miners.
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Oh, I got a comment that there's no sound.
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Is there sound guys?
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Can someone comment if they can hear me or not?
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I don't think I did anything different from my normal setup.
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Sad man, Sammy says, okay.
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You scared me there, brother.
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I think it might be on your end.
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Alright, so everyone is saying there is sound good.
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Thank you.
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I appreciate that.
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Okay, so let's talk about these mining rigs.
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So seal miner A1, that's the name of their mining rig seal miner A1 mass production remains on track to be completed in Q4 2024.
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This is very big news.
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It's anticipated to contribute 3.4 extra hash to the company's proprietary hash rate deployment of seal miner A1 rigs is expected to happen concurrently with the energization of Texas hydro cooling conversion and title Norway phase one in Q4 2024 Q1 2025.
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So these are all potential catalysts when we get the news that actually seal miner A1 mass production is has started.
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This is a potential catalyst orders for seal miner are potential catalysts TSMC's delivery of seal to initial tape out wafers remains on track to be completed by mid September 2024.
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By the way, TSMC is manufacturing their wafers and chips, which is the same company that manufactures the chips for NVIDIA.
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So not bad company for a bit dear to have chip verification and prototype testing will start immediately following tape out.
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If testing is successful, mass production is scheduled to commence near the end of 2024 and R&D for their next generation seal 03 is ongoing.
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Now, HBC high performance computing and AI.
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This is one of the, and I'm going to talk about this in a second, one of the big arbitrage opportunities for Bitcoin miners.
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Bit dear AI cloud services powered by NVIDIA, they're still near 100% average utilization.
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So, whereas with iris energy, we saw a drop in their AI business with one customer leaving, we have 100% average utilization this month.
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For bit dear TLM groups, comprehensive research and analysis of bit deers global energy assets and data center sites remains ongoing.
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So, this could be another potential catalyst when the results of this research and analysis and evaluation for bit deers global energy assets comes out.
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This may get investors imagination really running here.
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Same with iris energy, if you'll recall, there is an ongoing study with regards to valuing its assets and access to power.
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Construction in Norway is ongoing.
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Rockdale their hydro cooling conversion site.
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That's ongoing Bhutan 500 megawatts.
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And this is, by the way, subsidized by the Bhutan government construction remains on track with the primary substation expected to be completed q1 2025.
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So, a lot of potential catalysts here in the near term in the next six months, the convertible notes, which the market reacted very negatively to have been completely bought up a company made a partial repayment of the outstanding principal.
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So, the management commentary, I always like to see this further vertical integration and entry into the a six market with our proprietary chip technology are key to bit deers strategy.
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So, they're very much married to this vertical integration strategy, which I like, which allows it to become, I think, the most profitable Bitcoin minor because of this vertical integration and not sharing profits with people and companies along the supply chain.
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September, we are set to receive the initial C to seal to tape out wafers and we'll begin verification prototype testing.
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Mass production is scheduled to commence near the end of 2024 October.
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So, why the Bitcoin production was down a bit at 166 bitcoins.
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High network difficulty, temporary storm related power disruption and curtailments in Texas because of the summer heat, so energy curtailments.
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So, basically, I mean, the Bitcoin mining business is interesting.
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I think it will give it, you know, a pop when the Bitcoin rally resumes, but it's not the primary reason why I'm interested in this company.
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The primary reason I'm interested in this company, as I mentioned, they're Bitcoin mining rig production, their proprietary chip and Bitcoin mining is sort of a near term support for its stock price, but longer term.
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I think the Bitcoin mining rigs, their chip and what I'm going to talk about now, which is their AI and high performance computing potential business, which is supported by their access to power that is at currently greater than any other public Bitcoin miners plans for power capacity.
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We'll see that in a second.
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Those things make me especially bullish on this company.
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All right, I'm not going to repeat these.
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These are with as it relates to their individual sites.
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Now, if we look at their current capacity, it's at 895 megawatts.
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They have an additional 1600 megawatts planned for development, so total global electric capacity at a start of 2026 is 2500, and this is likely to increase.
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So, they're on par with iris energy in terms of their power capacity and development of it.
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Now, something that makes me an additional reason why I'm bullish on this company.
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Now, we're talking about qualitative.
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We haven't spoken anything about quantitative yet, but qualitatively why I like this company.
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If you look at management, Bittier Technologies CEO, Gihan Wu.
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Gihan Wu is the co-founder of Bitmain.
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And Bitmain currently is either the number one or number two supplier of Bitcoin mining rigs to public Bitcoin companies, public and private really.
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And the value of Bitmain, which he co-founded is now between 10 and 50 billion.
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It's a private company, so it's tough to nail down.
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And this particular individual owns 35% of this company.
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So, here we have a person that has done this before, built a company to, you know, between 10 and 50 billion.
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Now, he is the CEO of this new company.
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He owns 35% of it.
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It's currently valued at less than 1 billion.
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Just from a qualitative perspective, you can see where this is going.
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Or at least I like our chances here in terms of where this is going.
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This is Bitmain, by the way, the company that he co-founded.
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They're the ones that are producing the Antminer Bitcoin rigs, which are basically the industry standard almost for Bitcoin mining.
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As I mentioned, Bitmain, Bitdier, the market cap is less than 1 billion.
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Now, let's put this in context.
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So, Vanek came out with this report, which is interesting.
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I've been talking about this AI arbitrage play for Bitcoin miners for a while now.
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I really think this is going to be the main differentiator between Bitcoin miners.
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And we're going to see the ones that understand the AI opportunity really perform a lot better than the ones that don't just focus on Bitcoin mining, because ultimately Bitcoin mining is a very low margin business.
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So, I realized I was changing tabs, but it wasn't changing for you guys.
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It was still showing the Bitdier report.
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Let me actually show you guys what I was talking about very quickly.
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So, this is the Bitmain site.
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This is the company I was talking about that he co-founded, Jihan who co-founded, which produces the Bitcoin miners that are the industry standard.
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Let's talk about the Vanek report.
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Let's see here.
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All right, so this is the Vanek report.
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And so, it talks about the arbitrage opportunity between miners and AI data centers.
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So, here is a very important point that they bring up.
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So, AI companies need energy.
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Bitcoin miners have it.
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The market values growing AI high performance computing data center market access to power, especially in the near term.
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Commanding a premium due to heightened energy demands from Bitcoin miners and data centers.
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North American grid interconnection queues now exceed four years.
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However, by drawing large loads and collaborating with power grids by participating in grid balancing programs, existing Bitcoin miners can be uniquely equipped to support AI HPC immediately.
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Suitable Bitcoin mining sites could energize GPUs for AI in less than a year.
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So, if you want to establish your power connection, get the infrastructure up, start high performance computing, supporting AI from start to finish from scratch to actual production, it may take you four years.
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If you collab with a Bitcoin miner that already has the land power capacity infrastructure, that four years could be shrunk to just one year.
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So, this makes the assets of these public mining companies extremely valuable and extremely in demand.
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Public mining companies that understand this take advantage of it are poised to do very well.
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Highlighting the potential value of this time arbitrage, we found that Bitcoin miners trade at an average of 4.5 million per megawatt of install capacity.
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Compared to the above 30 million megawatt for some data center stocks.
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So, you have access to a megawatt.
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If you're just doing public Bitcoin, if you're just doing Bitcoin mining on it, the market is valuing it at 4.5 million per megawatt.
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If you're doing AI, high performance computing with it, it's being valued at 30 million per megawatt.
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So, the opportunity here is obvious.
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Now, if you were to say, okay, for a company like BitDeer, instead of 30 million, let's say you value each megawatt at 15 million.
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And let's say we're taking advantage, we're here, we're assuming the company is taking advantage of this high performance computing business opportunity.
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So, 15 million times 2500, their power capacity, that's 37 billion.
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Again, it's being valued at less than 1 billion right now.
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So, you know, is there a 37x opportunity here?
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Perhaps I'll be happy with just the 10x.
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If properly equipped with power bandwidth and cooling system Bitcoin mining sites could be ideal for capturing this value for AI HPC cloud services.
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And we already saw an example of this with core scientific.
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So, for those who are unfamiliar, core scientific is reaping the rewards of understanding this AI opportunity.
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On June 3rd, core scientific, the fourth largest Bitcoin miner by hash rates secured a 12 year contract with AI hyperscalar core weave projected to generate 3.4 billion in revenue from providing just 200 megawatts of infrastructure.
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Again, a bit there has a lot more than that that it can actually utilize.
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Then in early August core we've exercised yet another option for core scientific to deliver 112 more megawatts of HPC to host NVIDIA GPUs.
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Core scientific could soon become one of the US's largest data center operators if core weave exercises up to 118 megawatts of further expansion.
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Following the first announcement core scientific added 1.6 billion to its market cap with the shares up 99% versus the market vector digital asset equity index, which is by far the best performing constituents, a constituent that is core scientific.
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So, the task at hand is to identify, okay, what's the next public Bitcoin miner that is going to benefit from this arbitrage opportunity between Bitcoin mining and high performance computing.
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Now, let's look at what the power capacity comparison between the public Bitcoin miners.
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So, we have the current in the first column here with a bit here at 895 hot at 1100 marathon at 1000 riot at 1100.
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The target additional here by far the ones with the greatest additional power capacity target bit there and iris energy.
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And therefore, I think that these two companies had the most opportunity here in terms of appreciation.
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From utilizing the the high performance computing and AI opportunity taking advantage of that, the target total are 1 in 2.
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So iris energy 2570 bit there 2540.
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Now, keep in mind here as it relates to bit deer.
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This just talks about the their AI and high performance computing opportunity from their power capacity.
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It's not talking at all about the potential profits that they get from their own proprietary Bitcoin miner, the seal miner and their own proprietary mining chip.
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So, there's an added sort of avenue there added potential there.
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Now, Vanek does a a without going through all of the assumptions.
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I thought they were reasonable, but if you just take the net present value of a discounted cash flow for a 20% target power capacity converted to AI HPC.
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So those target numbers that we just talked about, the close to 2500.
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If we converted 20% of that power capacity that target power capacity to the AI HPC business, what would be the what would be the added market cap for these companies.
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For a bit dear, they're saying 6.4 billion.
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Basically, these numbers are in millions and for iris energy 6.5 billion.
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This is just a conversion of 20% of the power capacity to the to the high performance computing.
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Business again here.
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With regards to bit dear, we're talking about a company that's less than 1 billion.
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And the conversion to AI, maybe even more than 20% of its target power capacity.
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So, if we just if we just went with the numbers presented by Vanek.
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The 6.4 billion in terms of net present value for the cash flows generated from that 20% that is now being used in AI in their example.
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That would be more than a 6x appreciation from where it is right now.
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So, all this to say, ignore the noise and focus on the signal.
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I think the signal right here for the higher quality names in public Bitcoin mining is clear.
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There is an arbitrage opportunity here that is still not being valued by the market correctly.
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I think we have a management in bit dear that has skin in the game.
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One of the largest insider ownerships of a company that you're going to find, especially a company the size with the CEO having more than 30%.
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So, we know that dilution is at least the CEO will feel the dilution just like the retail investor will.
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And so, we have alignment of interest there and we just have a major opportunity here if they make the right moves.
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I can't guarantee that they do make the right moves here, but the experience of the management suggests that there is a high likelihood that they do ensure a lot.
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But I will keep a very close eye on this.
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I think that it's important in these times when the market is giving us perhaps nervousness for some investors that's important in times like this to focus on the individual positions that we hold and why we hold them.
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If you'd like to see those individual positions, do become a PIF member link in the description.
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If you found this live beneficial, you found this information beneficial, then leave a like and comment with your thoughts.
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I'd love to hear it without without keeping you too long.
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I'm going to let you guys go.
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Thank you all for those who participated in the comments.
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Thank you, Rashad, for your acknowledgement.
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Rashad says, I just want to acknowledge your support during these market storms to really appreciate it.
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Thank you, Rashad.
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And I truly appreciate your contributions as well.
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You can see why people make tragic decisions when markets decide to act up indeed.
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But it says any outside objective evaluation of their proprietary products.
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That's a good question.
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And yes, we will have more information about their about testing soon inshallah.
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But as I mentioned, experience of management suggests that they're able to inshallah because, you know, the CEO co-founded basically the number one company in terms of Bitcoin miners.
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So I think that we'll see positive results inshallah.
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And thanks for Sam.
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I'm glad you enjoyed the video.
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Alright, until next time, make sure to take care of yourself.
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Assalamu alaikum and peace be upon you all.