Bitdeer - Update (Beating a dead "deer" (Oct 26))

Stock is now back to under $8 and change.. MV = $2.1bn.

First, the macro backdrop of higher energy prices + higher rates = risk off.

Second, plenty of bad headlines in the land of AI... Anthropic's IPO is delayed and now talking about $1.5trn (vs. $2trn) previously. And looks like funding is tightening for neoclouds - just look at the CoreWeave bonds yielding 15%.....

I have been thinking through this.... My personal opinion is I will hold my position. Note... not investment advice. Personal opinion only. Do your own research.

There are a few things going on.

1. In a counterintuitive way, I actually prefer Bitdeer not quitting BTC, unlike some of its bitcoin mining peers. Being the market leader in a cyclical industry (presumably BTC will have its time in the sun again one day) is a virtue, as long as you have the staying power through the downturn. BUT BTC is a risk asset.... Will have to wait until rates come off or when USD devalues... BUT potential to make $1-2bn in profit from its mining + rig business at some point is not out of the question (say BTC ramps to 150-200k before next halving). The BTC business alone can support the current stock price of BTDR.

2. On balance, the transition of its power assets from BTC to AI is positive for BTDR in the long run.

3. See Pic 1.. Transcript from TSMC Q3 call... Semi supply chain remains bullish re 2027... All these chips will need to be powered right ? So base case is AI build out will grow through 2027.

4. A key event was Volta closing its financing ($5bn @ 11%?) in mid Oct 26. I anticipate BTDR will launch its bond soon after... It will look to raise >$1bn - $500M to finish Tydal build out and the rest to support its neocloud business.

5. Now despite the headline of CoreWeave borrowing cost blowing out, my hunch is it will reduce the IRR of BTDR neocloud business, but not killing it. BTDR has about 190MW available. So far, it is getting its customers to put down 50% of GPU cost upfront... Typical payback is 2.5 years for its 5 year deals. So 15% borrowing cost is still manageable.

6. A more important question is if BTDR can find customers for its power in Malaysia ? I am inclined to bet that it can..... BTDR has signed up to 190MW of co-lo deals with itself being the tenant.... Put it another way, it is up for say over $380M a year (assume $2M a year/MW) in co-lo payment a year. Surely, it is not reckless enough to sign up to these deals without having off-takes already lined up ?

7. Another point is, of the 190MW in Malaysia, 120MW will go live by Q2/Q3 27, and another 60MW by Q1 28....Again, why else would BTDR rush to sign up 190MW in quick time in Malaysia in space of 2 months ? Similarly, Tydal has 43MW in neocloud coming online in 2H 27. Perhaps, this remains the early wave of AI capX going global as inference/agents take hold.

8. But then... It won't be a walk in the park... CapX in Malaysia alone can be as much as $7.6bn... Even with prepayments from the customers, BTDR will still need to raise $3.8bn somewhere.... On the other hand, as long as you have clients with good credit agree to pay >$15bn over 5 years, I am sure the GPUs can be financed by someone or some instruments.

9. The recent news concerning Oracle, Firmus, SB Energy is positive for BTDR and others who have power ready assets available. For instance, Firmus has signed up OpenAi for its >500MW capacity (ball park estimate) in Malaysia. Now that its IPO is pushed out, does OpenAI need to look for other options ?

10. Not to mention, let's see if US will curtail AI build out after the mid term ? Again looking through a rose color lens, its Rockdale site is powered and waiting for the right tenant/deal.

11. Developments to watch: i) Can BTDR get its bond deal done ? 2) Is it on time with construction in Tydal ? 3) Can it sign up tenants for its 190MW in Malaysia ? 4) Anthropic IPO.

In summary => Stocks won't work or at best stuck in a range as long as rates + oil stay high, considering BTC + AI prefer lower rates as well. Stock price is also not expecting anything to go right.... The current stock price merely reflects its traditional BTC mining division. Market is not prepared to pay anything for its AI pivot. Rightly so... On the other hand, BTDR knows the true interest level in Malaysia and its other sites (which I would argue most investors don't + the stock is not that well followed or under the radar or even ignored given its origin)..... If its read (by signing these co-lo leases in quick time) is right, upside is significant as it secures clients/prepayments for its neocloud division.

My personal view is I will hang on for this white knuckled roller coaster ride.... Things can happen quickly in the land of BTC and AI....Both BTC and AI are likely secular trends with ups and downs (so far more downs clearly)..... The strategic value of BTDR is undervalued by most investors at the moment.