First, thank you all who subscribed to the newsletter early. We jumped the gun a bit headed into the weekend, and here you are. We’re launching the members’ site this week (aiming for Friday) and at that point I’ll be sending out the newsletter issue.
But things have a tendency to move fast in this sector and one of my new discoveries has blasted off so I wanted to get it on your radar so you can start looking at it. That is Neptune Digital Assets which trades on the TSX-V as NDA. In the US it lists on the OTC PINK sheets as NPPTF.
When I started looking at them last week they were trading at $0.61/share CAD and they opened this morning at $1.10 and are at $1.24 as I type this. Their P/E was 10.5 before the move, now it’s 18.6, which, all things considered, is still pretty sane. The P/E is based on a press release they put out saying that their quarterly earnings for Q2 2021 were over $6M CAD, and to be honest, I only calculated it using that quarterly figure because if you extrapolate that out across 3 more quarters, assuming they maintain those levels, it would drop them to a P/E of about 4.65.
Neptune’s Investor Relations clarified for me, those are Q2 earnings and not revenues, but I also want to know more about the nature of those earnings are, because their Q1 earnings were something like $29,000. It’s quite a move from 29K to > 6M in one quarter, so what’s important is this: was it a one-time event or the result of normal course operations? Neptune has about 0.09/share in digital assets on their balance sheet, including 82 BTC and 210 ETH.
They also have an investment in The Protocol Fund where their cost base is $250,000 CAD (~ $200K USD) which they had marked to market at $1.8M CAD ($1.43M USD). If I had to guess it would be that their Q2 earnings have been derived largely from a higher mark-to-market in that investment. I’ve seen this practice with crypto companies where they count balance sheet gains as “income” which the old stodgy guy in me tends to put in “quotes” because I tend to limit my scope on income to, you know, income.
In any case, I could be wrong on that – they have also been making moves to enter the Bitcoin mining and ETH staking spaces so maybe that income really is income and coming from somewhere I’m just not seeing yet. I have taken a starter position in it around the 0.59 – 0.65 CAD range.
Should you buy it now? This has gone up so much, so fast I would normally say wait for a pullback, but we are in rather unprecedented times. The last stock I saw like this was Fortress Technologies (TSX-V:FORT) which also did a very quick run up and then stabilized at that higher level. Again, events got ahead of us. Had we had everything up and running by the time I found Neptune, I would have sent out an alert at the time I entered. This one will be the subject of my next research report.
