BHM Capital Suggests Going Long on Phoenix: MENA Crypto Mining Growth Strategy

According to a recent report by BHM Capital, Phoenix Group PLC (PHX) is poised for significant growth with an aggressive expansion strategy. The report places a 12-month target price of AED 2.37 per share, suggesting a 48.3% potential upside. With a solid financial foundation, strategic acquisitions, and a focus on efficient, large-scale mining, Phoenix is well-positioned to become a key player in the global Bitcoin mining market, particularly in the MENA region.

Aggressive Expansion and Mining Efficiency

BHM Capital’s analysis highlights Phoenix Group’s current operation of 750 MW of mining capacity across several key regions, including the MENA, Americas, and CIS countries. The company plans to expand to 1,265 MW by 2025, with 500 MW of that capacity dedicated to the MENA region. By 2026, the company expects to capture 4-5% of global Bitcoin mining capacity.

Phoenix’s use of cutting-edge ASIC equipment and its focus on securing low-cost energy sources, especially in regions like Oman and the UAE, positions the company to maintain profitability even in volatile Bitcoin price environments. The report emphasizes the importance of Phoenix’s strategic energy cost advantages, which average USD 5.2 cents per kWh, a competitive edge in the global mining market.

Blockchain Partnership: AED-Pegged Stablecoin with Tether

In addition to its mining operations, Phoenix Group has made a significant move by announcing a partnership with Tether to launch an AED-pegged stablecoin. This collaboration marks a crucial step in Phoenix’s strategy to diversify its blockchain activities and drive adoption in the UAE’s 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 further boost Phoenix’s presence in the region, offering an efficient digital currency alternative that complements its crypto mining and trading activities.

Diversified Revenue Streams: Mining, Hosting, and Trading

The BHM Capital report notes Phoenix’s diversified business model, which includes:

• Self-Mining (55.7%): This segment is projected to grow to 74% of total revenue by FY27 as Phoenix continues to invest in its high-margin self-mining operations.

• Hosting Services (34.3%): Phoenix offers hosting services to third parties, ensuring stable revenues through long-term contracts.

• Trading (9.8%): Phoenix is an exclusive distributor of mining equipment in the MENA region, working with major players like Bitmain and MicroBT.

This diversification reduces Phoenix’s exposure to Bitcoin price fluctuations while providing flexibility to optimize revenues across different market cycles.

Financial Strength and Attractive Valuation

Phoenix Group’s robust financial position is a key highlight of the BHM Capital report. With over USD 333 million in cash and digital assets, the company is set to fund its expansion plans without taking on debt. Phoenix’s asset-light balance sheet and ability to generate cash flow make it an attractive investment opportunity, especially as it trades at a discount to global mining peers.

At a 13.5x P/E ratio (2024E), Phoenix is undervalued compared to its peers in the global mining sector, and BHM Capital projects significant earnings growth driven by capacity expansions and favorable Bitcoin price conditions.

Capitalizing on the MENA Region’s Favorable Crypto Environment

Phoenix Group’s strategic presence in the MENA region is a cornerstone of its growth plan. BHM Capital’s report highlights that the UAE and Oman offer significant advantages for crypto miners, including low energy costs and supportive regulatory frameworks. Phoenix’s partnerships, such as its joint venture with Green Data City in Oman, underscore the company’s commitment to leveraging the region’s favorable conditions.

The report also notes that Phoenix’s recent acquisitions, including M2, a cryptocurrency exchange, and its partnerships in blockchain gaming, position it to benefit from the growing adoption of digital assets in the region.

Risks and Opportunities

While the report underscores Phoenix’s strong growth potential, it also acknowledges risks. The company’s fortunes remain tied to Bitcoin prices, and any significant downturn in BTC below USD 50,000 could impact profitability. Additionally, fluctuations in electricity costs and regulatory changes in key markets could pose challenges.

Despite these risks, Phoenix’s expansion plans, focus on self-mining, and strong financial foundation offer significant upside potential. With Bitcoin prices expected to appreciate post-2024 halving, Phoenix is well-positioned to capitalize on the next wave of crypto growth.

Conclusion: A Strong Investment Opportunity in Crypto Mining

BHM Capital’s report concludes that Phoenix Group is well-positioned to capitalize on the growing global and regional demand for cryptocurrency mining. With a target price of AED 2.37 per share and substantial growth prospects in the MENA region, Phoenix Group represents a compelling investment opportunity for those looking to gain exposure to the crypto mining industry.