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5 Hong Kong Listed Companies Getting Into Bitcoin

Canaan Creative will be filing for a $1 billion IPO in Hong Kong according to the South China Morning Post. Canaan Creative are a Hangzhou based company that produce 20% of the Bitcoin mining hardware in the world. They trail Bitmain, the market leader. Canaan Creative expect to post revenues of $1.5 billion next year.

If they successfully list it could pave the way for more cryptocurrency related businesses to consider listing. Hong Kong is an interesting choice for Canaan — they previously considered a US listing apparently.

Which got us thinking; are there existing listed companies that are talking about Bitcoin?

Using the same screening methodology we ran the term ‘Bitcoin’ across all the HK listed companies’ latest annual reports. The results of our qualitative screening only yielded 5 results but it’s interesting to see nevertheless.

0231 Ping An Securities
Despite their name, Ping An Securities are more than a financial services brokerage. They’re engaged in property leasing (malls), supermarkets, and property development (hotels and commercial buildings).

Tucked away in their annual report, it appears they paid roughly HKD49 million as a deposit for a bitcoin miner. A drop in the ocean compared to their total assets. Most likely to Bitmain or Canaan Group! The miner is slated for delivery at some point in 2018.

It’s interesting to see that a listed company is getting involved in Bitcoin mining. ~USD6,000,000 translates into sizeable computing power.

[Latest Annual Report]

0521 CWT International
CWT is a rebranded HNA group company, née ‘HNA Holdings’. They acquired a Singaporean business for USD1 billion and took their name. Fun fact: the term ‘HNA’ turns up 105 times in their annual report.

CWTs principal business is commodities marketing but they are also involved in logistics and financial services, along with a slate of smaller businesses. Financial Services are conducted through its subsidiary ‘Straits Financial Group’ and accounted for ~8% of the company’s revenues. Straits Financial conducts brokerage, structure trades, and asset management.

Straits Financial also have clearing membership with CME Group and CBOE/NASQAQ, both of which last year started Bitcoin futures trading. Through this, Straits Financial have been offering clients Bitcoin futures products.

The market reaction has been well received with clientele trading the product outright or using the futures as a hedge against physical positions
––excerpt from the 2017 Annual Report
[Latest Annual Report]

2239 SMIT Holdings
SMIT is a technology company that has traditionally sold mobile POS systems and Conditional Access Modules (CAMs) for digital televisions. They started a blockchain server business last year and it already contributes 42.5% of the company’s revenues. This highlights the massive growth in demand the blockchain space has seen over the last year.

If demand for Bitcoin and cryptocurrencies continues the way it does, SMIT Holdings could easily see the majority of its revenues from from the blockchain server business this fiscal year, transforming it into a pure-play on the theme.

[Latest Annual Report]

8255 China Binary Sale Technology
China Binary Sales Technology (CBST) are principally engaged in the business of micropayments processing for mobile games, and facilitating mobile wallet top-ups in China.

The company has total assets of RMB419,000,000. Excluding cash and others leaves us with ~RMB270,000,000 in assets.

Of these, RMB51 million is in ‘unlisted securities’. Digging into the notes, we find that of this RMB51 million, RMB 12 million is an investment in 23% of a cryptocurrency mining fund, and an undisclosed portion is for;

13 private companies in the PRC, which are engaged in Bitcoin trading, social communication, development of Blockchain technology and crytocurrency, IT system development, peer-to-peer lending service platform, online media platform, virtual currencies mining, retailing business, and investment holding business in the PRC
The company currently trades at 0.7PBR. Funnily enough, if you exclude these RMB51MM in unlisted securities from the total assets you get close to the market cap of the company. It’s reasonable to assume they have close to 10% of their assets, and a multiple of their annual revenue in cryptocurrency related businesses.

Interestingly, the RMB85,000,000 in listed equity assets they own are connected in a transaction with Chong Sing Holdings FinTech Group Limited, the next company in the list.

[Latest Annual Report]

8207 Chong Sing Holdings FinTech
née Credit China FinTech Holdings

Chong Sing are branding themselves as a fintech company with recent forays into prepaid cards, payments services, and P2P online lending. The company’s roots are in pawn loans.

Their involvement in Bitcoin is through investments. Chong Sing paid HKD30,000,000 for 6.38% of Bitfury in their Series A round. Bitfury are a blockchain technology business and provide mining hardware, alongside Bitmain and Canaan.

It’s worth noting that it seems they hold a significant amount of cryptocurrency as they recorded a minus RMB120 million loss in fair value on their books vs. revenues of RMB600 million.

[Latest Annual Report]

None of these companies offer a pure-play into Bitcoin but rather some access to the blockchain theme. For access to Bitcoin or cryptos specifically it’s still better for investors to get exposure to the underlying asset or with asset management companies that offer cryptocurrency exposure.

It would be interesting to expand this search to look at broader terms such as cryptocurrency and blockchain. I suspect we’ll find many more companies with these terms. If you’re interested in such a screen sign up below and let me know. If it there’s enough interest I’ll give it a go and see what turns up!

5 Hong Kong Listed Companies Getting Into Bitcoin
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