UBI Blockchain Internet Ltd (OTCBB:UBIA) has gained close to 100% this week alone and currently trades at a nearly 1000% premium to its share price this time 12 months ago. The company is a blockchain focus entity, meaning the majority of this week’s gains have likely derived from the increased speculative attention surrounding bitcoin on the back of its meteoric four-week run throughout May. Unlike a number of the other winners in this space, however, we have also seen a couple of fundamental developments, and we are going to use these as guidance in an attempt to form a forward bias on the stock.
So, here goes.
Before we get going, it is worth mentioning that this one is essentially a brand-new company; in its current operational iteration, that is. Legacy descriptions suggest it used to manufacture some sort of climate control units but forget about that. As of this month onwards, the company is attempting to apply the principles, and the underpinning technology, of the blockchain to the healthcare space in China. Further, it’s, and we are quoting here, attempting to do this against a backdrop of the Internet of things. Now, that seems pretty vague, and it is. There is not too much information available as to exactly how the company plans to tie all these inputs together into something that can generate revenue, but there are clues in recent filings.
Specifically, two filings are of note.
The first is this 8K detailing the acquisition of a company called Nova. Nova is the owner/operator of a retail site in China called OYA Mall, which is a site where customers can buy products, including food, non-prescription medicine, skin care products, that sort of thing.
The second is this S-1, within which management outlines the company’s plans in a little more detail. From what we can tell, the company intends to set up a technology platform through which consumers can track food and healthcare products from source to customer, and it intends to base this platform on the blockchain. For those not familiar with the blockchain, it is the ledger system on which bitcoin is based. Just think of it as a method of storing data that is – once recorded – non-editable and immune to manipulation. There are thousands of potential applications of the blockchain to commercial activity (bitcoin is an example of the concept applied to currency) and UBI is attempting to capitalize on one such application in the healthcare space.
Using both of these filings as clues to operational activity, we can hypothesize that the OYA Mall website will be used as a platform through which the company can retail healthcare products tracked using its blockchain technology. That’s speculative, of course, but we don’t think it’s too far off the mark.
So how does this play into a forward thesis?
Well, as noted, there are thousands of potential applications in the space, and specifically as relates to synergies between the blockchain and the Internet of things. If UBI can capitalize on this particular crossover, it could be a winning operational focus. In that regard, there looks to be some long-term growth potential on an effective execution on its strategy.
The risk here lies in the fact that – as yet – this is all concept-stage stuff. The company is going to need capital to execute on the building of its technology as well as the marketing of products that eventually rely on said technology as a USP, and anyone picking up an exposure to this concept taking a punt on management’s ability to carry it through to realization. A punt, that is, that is likely going to be subject to varying degrees of dilution before UBI starts to collect revenue. With that said, and looking nearer term, we think there is probably some run room on the appreciation in value of bitcoin alone. The digital currency doesn’t look like it’s going to slow down anytime soon (it’s turning around post the recent correction), and the more it runs, the more traders are going to pile into stocks like UBI as speculative bitcoin/blockchain plays.
Bottom line: long term, an interesting concept and one with a large potential reward, but investors are essentially betting on management’s ability to carry from concept to market. Short term, a likely runner on bitcoin speculative activity.
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Disclosure: We have no position in UBIA and have not been compensated for this article.