Strong finish to FY18

Boku 14 January 2019 Update
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Boku

Strong finish to FY18

Trading update

Software & comp services

 

14 January 2019

Price

82.5p

Market cap

£185m

$1.28:£1

Net cash ($m) at end H118

28.4

Shares in issue (excludes 26.7m shares to be issued for Danal acquisition by end of January)

223.8m

Free float

85%

Code

BOKU

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

20.4

(35.6)

3.1

Rel (local)

17.9

(34.7)

15.6

52-week high/low

184.0p

68.5p

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 events

FY18 results

March 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 confirmed that total processed value (TPV), monthly active users, revenues and EBITDA saw strong growth in FY18, and it expects to report metrics at least in line with Edison and consensus expectations. This provides support for our FY19/FY20 growth forecasts for the core payments business. The recently acquired Danal business provides a second path to extend Boku’s growth in the longer term, while close co-operation with Danal Korea could open up payment opportunities in Korea.

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

98.8

45.3

12/19e

52.0

6.7

0.01

0.0

74.6

36.8

12/20e

67.9

19.1

0.05

0.0

20.2

12.8

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

FY18 trading at least in line with expectations

For FY18, Boku expects to report TPV of $3.6bn (+109% y-o-y), in line with our $3.55bn forecast (+108.5% y-o-y). Revenues are expected to be in the range $34.8–35.3m (+43–45% y-o-y), versus our $34.8m forecast, and EBITDA to be at least in line with or modestly exceed consensus (ie at least $5.3m). Cash at year-end stood at $32.3m, although as this is often skewed by working capital movements on the last day of the year, the company disclosed that the average cash balance in December was $24.4m (vs $19.2m in December 2017). This compares to our year-end cash forecast of $21.7m. Monthly active users reached 13.5 million in December, up from 8.0 million a year ago. We estimate that customer additions accelerated from 375k/month in H118 to 533k/month in H2. We make no changes to estimates, pending FY18 results due in March.

Further collaboration with Danal Korea possible

As planned, the Danal acquisition closed on 31 December 2018. Boku has since signed an MoU with Danal of Korea (originally a majority shareholder in the Danal business and soon to be a 5% shareholder in Boku) for further co-operation between the two companies. As Boku has had limited activity in South Korea to date, this agreement could open opportunities in both the payment and identity verification markets in the region.

Valuation: Looking better value

The stock has started to recover from the low of 67p reached in the wake of the Danal deal announcement. On EV/EBITDA and P/E multiples and FCF yield, it trades at a premium to peers in FY19, but falls to more reasonable levels in FY20, with P/E in line and EV/EBITDA and FCF yield at a c 10% discount to peers. Today’s update confirms strong trading for the core payments business; newsflow confirming new customers or extensions to existing agreements for Danal will be key to demonstrating the acquired business is making progress towards our revenue targets for FY19 and beyond.

Exhibit 1: Financial summary

$'m

2016

2017

2018e

2019e

2020e

2021e

31-December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

17.2

24.4

34.8

52.0

67.9

79.1

Cost of Sales

(3.2)

(2.3)

(2.6)

(8.7)

(12.0)

(14.6)

Gross Profit

14.0

22.1

32.2

43.3

55.9

64.4

EBITDA

 

 

(12.3)

(2.3)

5.4

6.7

19.1

26.9

Normalised operating profit

 

 

(13.8)

(4.0)

4.0

5.5

18.7

26.4

Amortisation of acquired intangibles

(1.7)

(1.3)

(1.3)

(1.3)

(1.3)

(1.3)

Exceptionals

(2.4)

(2.2)

(0.5)

0.0

0.0

0.0

Share-based payments

(2.1)

(0.9)

(2.4)

(2.0)

(1.4)

(1.4)

Reported operating profit

(19.9)

(8.4)

(0.2)

2.2

16.0

23.7

Net Interest

(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

Exceptionals

0.0

(17.1)

0.0

0.0

0.0

0.0

Profit Before Tax (norm)

 

 

(15.0)

(6.4)

3.2

4.9

18.1

25.8

Profit Before Tax (reported)

 

 

(21.1)

(28.0)

(1.0)

1.6

15.4

23.2

Reported tax

0.5

(0.1)

(0.1)

(0.1)

(1.5)

(3.5)

Profit After Tax (norm)

(11.2)

(4.8)

2.6

3.9

14.3

20.4

Profit After Tax (reported)

(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

Discontinued operations

0.0

0.0

0.0

0.0

0.0

0.0

Net income (normalised)

(11.2)

(4.8)

2.6

3.9

14.3

20.4

Net income (reported)

(20.6)

(28.1)

(1.1)

1.5

13.9

19.7

Basic average number of shares outstanding (m)

140.1

150.3

216.5

251.2

253.5

254.3

EPS - basic normalised ($)

 

 

(0.08)

(0.03)

0.01

0.02

0.06

0.08

EPS - diluted normalised ($)

 

 

(0.08)

(0.03)

0.01

0.01

0.05

0.07

EPS - basic reported ($)

 

 

(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

Revenue growth (%)

(10.4)

42.0

42.6

49.2

30.6

16.5

Gross Margin (%)

81.4

90.7

92.4

83.3

82.3

81.5

EBITDA Margin (%)

(71.4)

(9.5)

15.6

12.8

28.2

34.0

Normalised Operating Margin

(80.0)

(16.5)

11.5

10.5

27.5

33.4

BALANCE SHEET

Fixed Assets

 

 

26.8

26.9

62.3

60.7

58.7

55.1

Intangible Assets

25.7

25.8

60.8

58.8

57.6

56.3

Tangible Assets

0.5

0.4

0.5

0.5

0.7

0.8

Investments & other

0.6

0.7

1.0

1.3

0.5

(2.0)

Current Assets

 

 

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

Debtors

37.1

59.1

64.8

77.9

91.2

100.7

Cash & cash equivalents

11.3

18.7

21.7

31.6

50.0

75.9

Other

0.5

1.4

1.4

1.4

1.4

1.4

Current Liabilities

 

 

(61.0)

(77.5)

(85.0)

(103.7)

(118.4)

(129.2)

Creditors

(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

Short term borrowings

(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)

Long Term Liabilities

 

 

(15.2)

(0.1)

(0.1)

(0.1)

(0.1)

(0.1)

Long term borrowings

(15.1)

(0.0)

(0.0)

(0.0)

(0.0)

(0.0)

Other long term liabilities

(0.1)

(0.1)

(0.1)

(0.1)

(0.1)

(0.1)

Net Assets

 

 

(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

Shareholders' equity

 

 

(0.4)

28.6

65.0

67.9

82.8

103.9

CASH FLOW

Op Cash Flow before WC and tax

(12.3)

(2.3)

5.4

6.7

19.1

26.9

Working capital

(3.4)

1.0

1.9

5.5

1.4

1.3

Exceptional & other

4.2

(5.5)

(1.6)

(0.7)

(0.4)

0.0

Tax

(0.0)

0.0

(0.4)

(0.4)

(0.7)

(1.0)

Net operating cash flow

 

 

(11.5)

(6.8)

5.3

11.1

19.5

27.1

Capex

(1.5)

(0.3)

(0.5)

(0.6)

(0.6)

(0.6)

Acquisitions/disposals

0.0

0.0

(1.0)

0.0

0.0

0.0

Net interest

(0.3)

(0.9)

(0.8)

(0.6)

(0.6)

(0.6)

Equity financing

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

Other

0.1

(1.1)

0.0

0.0

0.0

0.0

Net Cash Flow

(13.1)

10.6

2.9

10.0

18.3

26.0

Opening net debt/(cash)

 

 

(3.6)

9.9

(16.2)

(19.2)

(29.1)

(47.5)

FX

(0.4)

0.4

0.0

0.0

0.0

0.0

Other non-cash movements

(0.0)

15.1

0.0

0.0

0.0

0.0

Closing net debt/(cash)

 

 

9.9

(16.2)

(19.2)

(29.1)

(47.5)

(73.4)

Source: Company accounts, Edison Investment Research

 

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.

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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.

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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.

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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

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Germany

London +44 (0)20 3077 5700

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London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

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US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

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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 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “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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