Accelerating mobile identity offering

Boku 7 December 2018 Update
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Boku

Accelerating mobile identity offering

Acquisition update

Software & comp services

 

7 December 2018

Price

75.5p

Market cap

£169m

$1.27/£1

Net cash ($m) at end-H118

28.4

Shares in issue

223.5m

Free float

50%

Code

BOKU

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(43.5)

(58.3)

0.0

Rel (local)

(40.4)

(54.1)

9.9

52-week high/low

184.0p

71.5p

Business description

Boku is the largest independent direct carrier billing (DCB) company. DCB uses a consumer’s mobile bill (prepaid credit or post-paid monthly bill) as the means to pay for digital content or services. Boku operates a billing platform that connects merchants with mobile network operators in more than 50 countries. It has 148 employees, with its main offices in the US, the UK, Germany and India.

Next event

FY18 trading update

January 2019

Analysts

Katherine Thompson

+44 (0)20 3077 5730

Dan Ridsdale

+44 (0)20 3077 5729

Boku is a research client of Edison Investment Research Limited

Boku has accelerated its move into products adjacent to its carrier billing services – it had already started developing mobile identity verification services, and the acquisition of US-based Danal will add a fully formed business in this field and bring a new set of customers. Boku is paying mainly share-based initial consideration of $37.2m, with up to a further $64m payable in equity if ambitious revenue targets for FY19 are achieved. While initially dilutive, the deal broadens the company’s product portfolio and expands the types of merchants it can serve, supporting Boku’s growth prospects in the medium- to long-term.

Year end

Revenue ($m)

EBITDA* ($m)

EPS* ($)

DPS ($)

P/E (x)

EV/EBITDA (x)

12/17

24.4

(2.3)

(0.03)

0.0

N/A

N/A

12/18e

34.8

5.4

0.01

0.0

89.7

36.5

12/19e

52.0

6.7

0.01

0.0

67.7

29.7

12/20e

67.9

19.1

0.05

0.0

18.4

10.3

Note: *EBITDA and EPS (diluted) are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Buying a US-based mobile ID verification business

Danal sells mobile ID verification services to a mainly US customer base, using its connections to North American mobile carriers. Danal’s carrier connections could boost Boku’s direct carrier billing business, which has not been particularly strong in the US. Boku can also bring to Danal its many carrier connections in Europe, the Middle East and Asia, to help it to globalise its offering. Boku will be able to broaden its merchant base from purely digital content to a range of different verticals.

Initial consideration equates to 10.7% dilution

Boku is paying initial consideration of 26.7m shares (10.7% dilution), $1m in cash and $3m in warrants (at £1.41) to acquire a business generating annual revenues of c $5m and an EBITDA loss of c $5m. Deferred consideration of up to $64m is payable if revenues reach at least $10m in FY19; the maximum is only payable if revenues reach $20m, which we believe is unlikely to happen. We have revised our forecasts to incorporate Danal from 31 December. This results in a reduction in EBITDA of 42.5% in FY19e and flat EBITDA in FY20e, with an EPS cut of 55% in FY19e and 10% in FY20e.

Valuation: Negative reaction overdone

In the past two months, the share price has seen a significant pullback, depressed by general equity market weakness, especially for highly rated US tech stocks (many of whom are Boku customers), as well as increasing liquidity as IPO lock-ups have expired. The stock declined more than 20% on the announcement of yesterday’s deal. On our new forecasts incorporating Danal, valuation multiples are forecast to fall to modest levels by FY20e, which, in our view, is not reflective of the long-term growth opportunity for Boku.

Acquisition of Danal

Boku has announced that it is planning to acquire Danal Inc, a US-based provider of mobile identity verification services.

Background on Danal

Danal was established in 2008 in San Jose, US. The company has 35 employees mostly based in San Jose. Until 2016, Danal operated a direct carrier billing business called BilltoMobile, which it sold to Bango. The remaining business provides the following services:

Exhibit 1: Danal products

Product

Detail

eKYC

Uses data matching/cleansing, video and biometrics capabilities to help perform online know-your-customer or anti-money laundering checks

Instant acquisition

Obtain verified profile data from Danal to sign up new customers

Phone verification

Seamlessly verify a user's phone number in an app during sign-ups, log-ins and high-value transactions

Fraud prevention

Use data matching, account baselining, phone identification and proactive monitoring to prevent fraud

TCPA

Meet Telecom Consumer Protection Act requirements by using Danal's list cleansing and maintenance service, to ensure only legitimate customer numbers are held

Product

eKYC

Instant acquisition

Phone verification

Fraud prevention

TCPA

Detail

Uses data matching/cleansing, video and biometrics capabilities to help perform online know-your-customer or anti-money laundering checks

Obtain verified profile data from Danal to sign up new customers

Seamlessly verify a user's phone number in an app during sign-ups, log-ins and high-value transactions

Use data matching, account baselining, phone identification and proactive monitoring to prevent fraud

Meet Telecom Consumer Protection Act requirements by using Danal's list cleansing and maintenance service, to ensure only legitimate customer numbers are held

Source: Danal

Danal has connections to US, Canadian, UK, French and Spanish carriers.

Exhibit 2: Danal carrier connections

Country

Carrier

US

AT&T, T-Mobile, Sprint, Verizon

Canada

Bell, Rogers, Telus, Virgin

UK

3, EE, Telefonica, Vodafone

France

Bouygues, Orange

Spain

Orange, Telefonica, Vodafone

Country

US

Canada

UK

France

Spain

Carrier

AT&T, T-Mobile, Sprint, Verizon

Bell, Rogers, Telus, Virgin

3, EE, Telefonica, Vodafone

Bouygues, Orange

Orange, Telefonica, Vodafone

Source: Boku

In terms of business model, Danal charges a per-transaction fee to the merchant (its website quotes a list price of 4c per transaction, before any volume-based contracts are taken into account), and then pays away a revenue share to the carrier.

In 2017, Danal generated revenues of $5.1m and an EBITDA loss of $5.2m. The company commented that revenues and EBITDA were likely to be at a similar level in FY18. Gross margins are currently close to 30%; however, some carriers have minimum revenue guarantees in place so as volumes ramp this should result in gross margin expansion, with a level of 50% achievable, according to management.

Strategic rationale – new products, new customers, new countries

Boku has previously outlined plans to develop new services that make use of its network of carrier connections, including the development of Boku Identity services. Acquiring Danal will bring Boku a fully formed mobile ID verification service with a customer base that includes MoneyGram, Square, PayPal, BNP Paribas, Western Union and USAA, and channel partners including Fiserv, Experian (also a shareholder), neustar and TransUnion. Danal has strong connections to US carriers, which Boku could leverage in its carrier billing services (the US has not traditionally been an area of strength for Boku); in addition, Boku can bring the strength of its network of carrier connections to Danal to broaden its geographic reach.

Danal’s business expands the type of merchants that Boku can service, from digital content to a wide range of verticals such as general e-commerce, financial services, transportation and government.

Management noted that Danal’s selling shareholders include various trade investors as well as the parent company in Korea, Danal Co, with differing objectives and views on what the company should be doing. In addition, the company has been loss-making and has not had a high level of cash with which to grow the business, which goes some way to explaining the modest level of revenues and revenue growth that the business has achieved in recent years. Management’s view is that its strategic focus and ability to invest should enable it to grow Danal’s business substantially from the current level.

Deal structure

While the acquisition agreement was signed yesterday, the deal is expected to complete at the end of FY18; the deal requires approval from Danal shareholders. Boku is paying initial consideration worth c $37.2m, on a debt-free/cash-free basis, made up of three elements:

26.7m shares (10.7% dilution). At Wednesday’s closing price of 98p, these are worth $33.2m. At the current level of 75.5p, they are worth $25.6m.

$1m in cash.

$3m in warrants with a £1.41 exercise price, exercisable for five years.

The company will also pay contingent consideration of up to $64m, in the form of shares worth $62m and warrants worth $2m (with an exercise price of £1.45 and five-year exercise period), subject to Danal hitting challenging revenue targets in FY19. To be eligible to earn the contingent consideration, Danal must generate revenues of at least $10m in FY19; the consideration is stepped up according to revenue bands. The shares will be issued at a minimum/maximum price of £1.20/£1.70, equating to the potential issue of 28.7–40.7m shares (or 10.3–14.0% dilution based on the post-acquisition share count) if the maximum revenue target of $20m is hit. The company has the option to pay the consideration in cash.

The selling shareholders have agreed to a lock-up on their Boku shares of six months for 50% and 12 months for the remaining 50%, bar $2m-worth of shares, which are subject to an orderly market arrangement.

Based on initial consideration alone, Boku is paying 6.5x FY17 revenues based on Wednesday’s closing price, or 5.8x at the 75.5p the share is now trading at. This compares to Boku trading at 10.7x FY17 and 7.5x FY18 revenues at Wednesday’s closing price, or 8.1x and 5.7x, respectively, at 75.5p per share.

If the maximum revenue target of $20m were achieved in FY19, this would equate to an EV/sales multiple of 4.9x FY19e revenues, compared to a pre-deal multiple of 6.2x for Boku.

Integration plans

The company intends to retain all Danal employees and expects to increase investment in the business to strengthen sales and marketing and to fund engineering resources to expand carrier connections and develop higher margin products.

Trading update – Boku trading in line year-to-date

Boku updated various KPIs for the 10 months to 31 October:

Total payment volume (TPV) of $2.8bn (+124% y-o-y). This compares to TPV of $1.54bn in H118 and our forecast of $3.55bn for FY18.

Monthly active users of 12.2m (+83% y-o-y) at the end of October, up from 10.3m at the end of H118.

The number of Boku Account connections to merchants increased to 155, from 127 at the end of H118. We note that the Apple carrier billing website lists 17 additional carriers in 14 countries compared to the last time we wrote in September. This includes entry into new countries such as Bahrain, Cambodia and Luxembourg.

Changes to forecasts

Based on the trading update, we make no changes to our underlying forecasts. We have revised our forecasts to incorporate the Danal acquisition from 31 December. Management expects the acquisition to be earnings-dilutive in FY19, with improving performance in FY20 and earnings accretion from FY21.

We assume that Boku is able to accelerate Danal’s revenues to $10m in FY19 and $18m in FY20, at gross margins of 41% in FY19 and 50% in FY20. We assume a step-up in operating costs in FY19 to $9m, remaining flat in FY20. As the company has not specified exactly how the deferred consideration is paid out between the $10–20m revenue targets for FY19; we have not factored in any dilution. Management commented that at the $10m revenue level, the deferred consideration would be minimal and could be paid out in cash to avoid dilution.

The table below summarises the changes to our forecasts.

Exhibit 3: Changes to estimates

$m

FY18e

FY19e

FY20e

Old

New

Change

y-o-y

Old

New

Change

y-o-y

Old

New

Change

y-o-y

Revenues

34.8

34.8

0.0%

42.6%

42.0

52.0

23.8%

49.2%

49.9

67.9

36.1%

30.6%

Gross profit

32.2

32.2

0.0%

45.3%

39.2

43.3

10.3%

34.5%

46.9

55.9

19.2%

29.1%

Gross margin

92.4%

92.4%

0.0%

1.7%

93.5%

83.3%

-10.2%

-9.1%

94.0%

82.3%

-11.7%

-1.0%

EBITDA

5.4

5.4

0.0%

333.7%

11.6

6.7

-42.5%

23.2%

19.1

19.1

0.0%

186.7%

EBITDA margin

15.6%

15.6%

0.0%

25.1%

27.7%

12.8%

-53.6%

-2.7%

38.4%

28.2%

-26.5%

15.3%

Normalised operating profit

4.0

4.0

0.0%

199.7%

10.4

5.5

-47.5%

35.9%

18.7

18.7

0.0%

242.0%

Normalised operating profit margin

11.5%

11.5%

0.0%

28.0%

24.8%

10.5%

-14.3%

-1.0%

37.4%

27.5%

-9.9%

17.0%

Reported operating profit

-0.2

(0.2)

0.0%

97.5%

7.1

2.2

-69.5%

-1129.8%

16.0

16.0

0.0%

638.2%

Reported operating margin

-0.6%

-0.6%

0.0%

33.9%

16.9%

4.2%

-12.8%

4.8%

32.1%

23.6%

-8.5%

19.4%

Normalised PBT

3.2

3.2

0.0%

150.1%

9.8

4.9

-50.2%

51.6%

18.1

18.1

0.0%

269.7%

Reported PBT

-1.0

(1.0)

0.0%

96.4%

6.5

1.6

-75.4%

-261.6%

15.4

15.4

0.0%

860.5%

Normalised net income

2.6

2.6

0.0%

153.3%

7.8

3.9

-50.2%

50.0%

14.3

14.3

0.0%

269.7%

Reported net income

(1.1)

(1.1)

0.0%

96.1%

6.2

1.5

-75.4%

-238.9%

13.9

13.9

0.0%

809.9%

Normalised basic EPS ($)

0.01

0.01

0.0%

137.0%

0.03

0.02

-55.5%

29.3%

0.06

0.06

-10.5%

266.2%

Normalised diluted EPS ($)

0.01

0.01

-0.7%

133.2%

0.03

0.01

-55.1%

32.5%

0.06

0.05

-9.8%

268.6%

Reported basic EPS ($)

(0.01)

(0.01)

0.0%

97.3%

0.03

0.01

-78.1%

-219.7%

0.06

0.05

-10.5%

801.4%

Net debt/(cash)

(20.2)

(19.2)

-5.0%

18.1%

(30.2)

(29.1)

-3.7%

52.1%

(47.6)

(47.5)

-0.2%

63.0%

TPV ($bn)

3.55

3.55

0.0%

108.5%

4.96

4.96

0.0%

39.9%

6.39

6.39

0.0%

28.7%

Take rate

0.98%

0.98%

0.00%

0.85%

0.85%

0.00%

0.78%

0.78%

0.00%

Source: Edison Investment Research

 

Exhibit 4: Financial summary

$m

2014

2015

2016

2017

2018e

2019e

2020e

2021e

31-December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

18.3

19.2

17.2

24.4

34.8

52.0

67.9

79.1

Cost of Sales

(4.1)

(4.0)

(3.2)

(2.3)

(2.6)

(8.7)

(12.0)

(14.6)

Gross Profit

14.2

15.2

14.0

22.1

32.2

43.3

55.9

64.4

EBITDA

 

 

(9.6)

(11.4)

(12.3)

(2.3)

5.4

6.7

19.1

26.9

Normalised operating profit

 

 

(9.8)

(12.4)

(13.8)

(4.0)

4.0

5.5

18.7

26.4

Amortisation of acquired intangibles

(0.8)

(1.9)

(1.7)

(1.3)

(1.3)

(1.3)

(1.3)

(1.3)

Exceptionals

(2.1)

(0.1)

(2.4)

(2.2)

(0.5)

0.0

0.0

0.0

Share-based payments

(1.7)

(1.8)

(2.1)

(0.9)

(2.4)

(2.0)

(1.4)

(1.4)

Reported operating profit

(14.4)

(16.2)

(19.9)

(8.4)

(0.2)

2.2

16.0

23.7

Net Interest

(0.6)

(0.4)

(1.2)

(2.4)

(0.8)

(0.6)

(0.6)

(0.6)

Joint ventures & associates (post tax)

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Exceptionals

0.0

0.0

0.0

(17.1)

0.0

0.0

0.0

0.0

Profit Before Tax (norm)

 

 

(10.4)

(12.8)

(15.0)

(6.4)

3.2

4.9

18.1

25.8

Profit Before Tax (reported)

 

 

(15.0)

(16.6)

(21.1)

(28.0)

(1.0)

1.6

15.4

23.2

Reported tax

(0.4)

(0.4)

0.5

(0.1)

(0.1)

(0.1)

(1.5)

(3.5)

Profit After Tax (norm)

(7.8)

(9.6)

(11.2)

(4.8)

2.6

3.9

14.3

20.4

Profit After Tax (reported)

(15.4)

(17.0)

(20.6)

(28.1)

(1.1)

1.5

13.9

19.7

Minority interests

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Discontinued operations

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Net income (normalised)

(7.8)

(9.6)

(11.2)

(4.8)

2.6

3.9

14.3

20.4

Net income (reported)

(15.4)

(17.0)

(20.6)

(28.1)

(1.1)

1.5

13.9

19.7

Basic average number of shares outstanding (m)

21.3

27.4

140.1

150.3

216.5

251.2

253.5

254.3

EPS - basic normalised ($)

 

 

(0.36)

(0.35)

(0.08)

(0.03)

0.01

0.02

0.06

0.08

EPS - diluted normalised ($)

 

 

(0.36)

(0.35)

(0.08)

(0.03)

0.01

0.01

0.05

0.07

EPS - basic reported ($)

 

 

(0.72)

(0.62)

(0.15)

(0.19)

(0.01)

0.01

0.05

0.08

Dividend ($)

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Revenue growth (%)

#DIV/0!

4.7

(10.4)

42.0

42.6

49.2

30.6

16.5

Gross Margin (%)

77.6

79.1

81.4

90.7

92.4

83.3

82.3

81.5

EBITDA Margin (%)

(52.5)

(59.2)

(71.4)

(9.5)

15.6

12.8

28.2

34.0

Normalised Operating Margin

(53.2)

(64.4)

(80.0)

(16.5)

11.5

10.5

27.5

33.4

BALANCE SHEET

Fixed Assets

 

 

32.7

30.8

26.8

26.9

62.3

60.7

58.7

55.1

Intangible Assets

32.5

30.1

25.7

25.8

60.8

58.8

57.6

56.3

Tangible Assets

0.2

0.7

0.5

0.4

0.5

0.5

0.7

0.8

Investments & other

0.0

0.0

0.6

0.7

1.0

1.3

0.5

(2.0)

Current Assets

 

 

72.5

53.0

48.9

79.3

87.9

111.0

142.6

178.1

Stocks

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Debtors

59.7

43.3

37.1

59.1

64.8

77.9

91.2

100.7

Cash & cash equivalents

12.0

9.0

11.3

18.7

21.7

31.6

50.0

75.9

Other

0.7

0.6

0.5

1.4

1.4

1.4

1.4

1.4

Current Liabilities

 

 

(69.6)

(65.5)

(61.0)

(77.5)

(85.0)

(103.7)

(118.4)

(129.2)

Creditors

(64.6)

(60.4)

(54.9)

(75.0)

(82.5)

(101.2)

(115.9)

(126.7)

Tax and social security

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Short term borrowings

(5.0)

(5.1)

(6.1)

(2.5)

(2.5)

(2.5)

(2.5)

(2.5)

Other

0.0

0.0

0.0

(0.0)

(0.0)

(0.0)

(0.0)

(0.0)

Long Term Liabilities

 

 

0.0

(0.3)

(15.2)

(0.1)

(0.1)

(0.1)

(0.1)

(0.1)

Long term borrowings

0.0

(0.2)

(15.1)

(0.0)

(0.0)

(0.0)

(0.0)

(0.0)

Other long term liabilities

0.0

(0.1)

(0.1)

(0.1)

(0.1)

(0.1)

(0.1)

(0.1)

Net Assets

 

 

35.5

18.0

(0.4)

28.6

65.0

67.9

82.8

103.9

Minority interests

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Shareholders' equity

 

 

35.5

18.0

(0.4)

28.6

65.0

67.9

82.8

103.9

CASH FLOW

Op Cash Flow before WC and tax

(9.6)

(11.4)

(12.3)

(2.3)

5.4

6.7

19.1

26.9

Working capital

9.3

11.6

(3.4)

1.0

1.9

5.5

1.4

1.3

Exceptional & other

(1.6)

1.1

4.2

(5.5)

(1.6)

(0.7)

(0.4)

0.0

Tax

(0.0)

(0.0)

(0.0)

0.0

(0.4)

(0.4)

(0.7)

(1.0)

Net operating cash flow

 

 

(1.9)

1.3

(11.5)

(6.8)

5.3

11.1

19.5

27.1

Capex

(1.1)

(3.6)

(1.5)

(0.3)

(0.5)

(0.6)

(0.6)

(0.6)

Acquisitions/disposals

5.9

0.3

0.0

0.0

(1.0)

0.0

0.0

0.0

Net interest

(0.3)

(0.3)

(0.3)

(0.9)

(0.8)

(0.6)

(0.6)

(0.6)

Equity financing

0.2

0.1

0.1

19.8

0.0

0.0

0.0

0.0

Dividends

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Other

0.6

(0.0)

0.1

(1.1)

0.0

0.0

0.0

0.0

Net Cash Flow

3.3

(2.2)

(13.1)

10.6

2.9

10.0

18.3

26.0

Opening net debt/(cash)

 

 

(4.9)

(7.0)

(3.6)

9.9

(16.2)

(19.2)

(29.1)

(47.5)

FX

(1.2)

(0.8)

(0.4)

0.4

0.0

0.0

0.0

0.0

Other non-cash movements

0.0

(0.4)

(0.0)

15.1

0.0

0.0

0.0

0.0

Closing net debt/(cash)

 

 

(7.0)

(3.6)

9.9

(16.2)

(19.2)

(29.1)

(47.5)

(73.4)

Source: Boku, Edison Investment Research

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This report has been commissioned by Boku and prepared and issued by Edison, in consideration of a fee payable by Boku. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

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Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2018 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.United Kingdom

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This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document (nor will such persons be able to purchase shares in the placing).

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a) (11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Boku and prepared and issued by Edison, in consideration of a fee payable by Boku. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the Edison analyst at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2018 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.United Kingdom

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document (nor will such persons be able to purchase shares in the placing).

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a) (11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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