Blue Star Capital - Initiation of Coverage
Technology investor trading at a deep discount to NAV and poised to exploit growth in the burgeoning e-sports industry
Blue Star Capital is an investment company with a focus on new technologies, particularly in the areas of blockchain, media and gaming. The focus is on businesses that have the capacity for substantial growth and increase in value over the medium to long-term.
Expansion into e-sports diversifies the portfolio and provides significant growth opportunities
On 14th October 2019 Blue Star announced it had entered into an agreement to make investments of c.£150,000 each in six early stage e-sport companies operating across six different geographic markets. E-sports, which sees players compete against each other on popular video games, is a rapidly growing industry, forecast to rise in value from $1.1 billion in 2019 to $1.79 billion by 2022.
Placings completed to finance investments, with warrant issues providing the potential for further funding
Two placings of £0.45 million each have been completed to fund the e-sports investments. In addition, warrants to a total value of £1.37 million, at prices ranging from 0.1p to 0.25p per share, are being issued to incentivise directors and provide access to further funding.
SatoshiPay and Sthaler other stand out investments
Micropayments platform business SatoshiPay is Blue Star’s main investment, currently valued at £4.6 million. The company is focusing on expanding its online payment service which allows digital content and service providers to monetise their products. Biometrics payments provider Sthaler meanwhile is advancing commercialisation of its Fingopay product.
Valuation suggests 35% upside, with the opportunity for further value creation in the medium to long-term
Taking into account recent events we estimate a NAV per share of 0.194p. With Blue Star shares currently trading at 0.115p they are therefore priced at a discount of 41%, which represents upside of 69% should they trade at parity to our estimated NAV. However, to add a degree of conservatism, we apply a 20% discount to our NAV estimate to set our target price of 0.155p per share, implying upside of 35% from current levels. Conviction Buy.
RISK WARNING & DISCLAIMER
Blue Star Capital is a research client of Align Research. Align Research holds an interest in the shares of Blue Star Capital. Full details of our Company & Personal Account Dealing Policy can be found on our website http://www.alignresearch.co.uk/legal/
For full disclaimer information please refer to the last page of the full document. This investment may not be suitable for your personal circumstances. If you are in any doubt as to its suitability you should seek professional advice. This note does not constitute advice and your capital is at risk. This is a marketing communication and cannot be considered independent research.
| Year to Sept | 2015A | 2016A | 2017A | 2018A |
|---|---|---|---|---|
| Revenues (£m) | - | - | - | - |
| Pre-tax (£m) | (0.11) | (0.17) | (0.19) | 1.47 |