boku 2

Upgrading estimates on strong H1 trading

Boku 20 July 2021 Update
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Boku

Upgrading estimates on strong H1 trading

H1 trading update

Software & comp services

20 July 2021

Price

164.0p

Market cap

£485m

$1.37:£1

Net cash ($m) at end H121

48.6

Shares in issue

295.6m

Free float

93%

Code

BOKU

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(2.1)

(6.7)

100.6

Rel (local)

0.0

(6.6)

73.1

52-week high/low

190p

82p

Business description

Boku operates a billing and identity verification platform that connects merchants with mobile network operators in more than 80 countries. It has c 300 employees, with its main offices in the US, UK, Estonia, Germany and India.

Next events

H121 results

September

Analyst

Katherine Thompson

+44 (0)20 3077 5730

Boku is a research client of Edison Investment Research Limited

The high level of demand for digital content and online transactions has continued in H121, driving organic revenue growth of 21% y-o-y. Management is confident it will beat consensus revenue and adjusted EBITDA forecasts for FY21 and we have raised our estimates accordingly. Boku plans to increase investment in its product suite and sales and marketing to take advantage of the opportunities to help its merchant base access consumers using a range of mobile-based payment methods.

Year
end

Revenue ($m)

EBITDA*
($m)

Diluted EPS*
(c)

DPS
(c)

P/E
(x)

EV/EBITDA
(x)

12/19

50.1

7.4**

1.2

0.0

186.9

83.1

12/20

56.4

15.3

3.2

0.0

70.1

40.3

12/21e

68.9

19.6

3.7

0.0

60.9

31.4

12/22e

79.0

22.0

4.1

0.0

54.4

28.0

Note: *EBITDA and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. **Excludes one-off revenue recognition.

Strong trading continued through H121

Boku expects to report revenue of at least $34m for H121, equivalent to y-o-y growth of 37%. Adjusting for the Fortumo acquisition that completed on 1 July 2020, organic growth was at least 21% y-o-y. Underlying Payments revenue grew 20% and Identity revenue grew 30%. The company expects to report adjusted EBITDA of at least $9.6m for H121 (+50% y-o-y). Growth in monthly active users continued through H1, increasing by 3% from the end of FY20 to 29.7m. Total payment volume (TPV) grew 29% y-o-y and the take rate was c 0.7%, stable versus H220.

Raising guidance for FY21

Management expects to beat current consensus for FY21 (revenue $66.3m, EBITDA $18.0m). Considering it expects H121 EBITDA of $9.6m and business is typically seasonally stronger in H2, we have raised our estimates to reflect this. We have also reflected management’s comment about increased investment in the business in H221 and FY22. This results in upgrades to our normalised diluted EPS forecasts of 17.1% in FY21 and 6.6% in FY22. The company is focused on helping merchants reach mobile customers, particularly those using non-standard and local payment methods. The increased investment will be used to enhance the product suite to address new market segments and to drive cross-selling.

Valuation: Trading at a discount to peer average

Valuing the Payments business alone using the average FY21e EV/EBITDA multiple for its peer group (37.4x, up from 35.0x last time we wrote) results in a per share value of 220p, providing upside to the current share price. The Identity business could provide further upside – including it at its unimpaired cost would take the per share value up to 226p. We note that payments companies specialising in simplifying complex payment transactions, such as cross-border transactions or local payment methods, command even higher valuations than the likes of Square (124x FY21e EBITDA) and Adyen (109x).

H1 trading update

In the table below, we summarise the expected H1 performance.

Exhibit 1: Key H121 metrics

H121

Growth y-o-y

Comment

Payments revenue

≥$30.5m

39%

Boku (implied)

≥$26.4m

20%

Based on growth rate

Fortumo (implied)

≥$4.1m

N/A

Identity revenue

≥$3.5m

30%

Group revenue

≥$34.0m

37%

Monthly active users

29.7m

46%

Boku (implied)

26.0m

28%

Based on growth rate

Fortumo (implied)

3.7m

N/A

TPV

$4.0bn

29%

Take rate

0.7%

In line with H220 (0.78%)

Adjusted EBITDA

≥$9.6m

50%

Cash at end H121

$48.6m

Average daily cash June 2021

$38.0m

Source: Boku

In the Payments business, new connections were launched for Google, Netflix, DAZN, Spotify, Epic Games, Amazon, Riot Games and Tinder across both direct carrier billing and wallets. The company has also obtained payment licences that cover 35 countries across Europe and Asia, compared to only the UK at the start of the year.

In the Identity business, connections were added in Indonesia, Italy and Spain. The business saw strong growth certain existing customers and growing volumes from new mobile wallet customers in Indonesia.

During H121, the company repaid $11.25m of the $20m debt put in place to acquire Fortumo.

The company also noted the earn-out period for Fortumo concluded on 30 June 2021. Since the acquisition, $5.4m in cash has been sitting in escrow, representing the maximum potential payout (which required EBITDA for the 12 months to 30 June 2021 well ahead of expectations). The company now estimates the payout is unlikely to exceed $2.7m so should receive the balance by 30 September.

Changes to forecasts

Management believes group revenue and adjusted EBITDA will be ahead of expectations for FY21 while Identity revenue and adjusted EBITDA are tracking in line with board expectations. We have revised our estimates to reflect stronger revenue in FY21–23. We have also increased our opex assumptions for all three years, based on management comments that it will be investing in its product suite and in sales and marketing in H221 and into FY22 to take advantage of the many opportunities available.

Overall, our EBITDA forecasts increase by 10.5% in FY21 and 4.7% in FY22 and are unchanged for FY23. Normalised diluted EPS forecasts increase by 17.1% in FY21 and 6.6% in FY22 and are unchanged for FY23.

Exhibit 2: Changes to forecasts

$'m

FY21e

FY21e

FY22e

FY22e

FY23e

FY23e

Old

New

Change

y-o-y

Old

New

Change

y-o-y

Old

New

Change

y-o-y

Payment revenues

59.6

61.9

3.9%

20.9%

65.8

69.0

4.9%

11.3%

73.3

76.1

3.9%

10.3%

Identity revenues

6.9

7.0

0.8%

34.5%

12.0

10.0

-16.7%

43.8%

15.5

13.0

-16.1%

30.0%

Total revenues

66.5

68.9

3.6%

22.1%

77.8

79.0

1.5%

14.6%

88.8

89.1

0.4%

12.8%

Gross profit

59.1

62.8

6.2%

22.0%

67.0

71.0

6.0%

13.0%

75.5

79.2

4.9%

11.6%

Gross margin

88.9%

91.2%

2.3%

-0.1%

86.1%

89.9%

3.8%

-1.3%

85.0%

88.9%

3.9%

-1.0%

Payment EBITDA

21.2

22.6

6.4%

17.7%

23.2

24.5

5.6%

8.4%

27.7

28.3

2.1%

15.6%

Identity EBITDA

(3.5)

(3.0)

-14.2%

-23.4%

(2.2)

(2.5)

13.6%

-16.5%

(1.0)

(1.6)

63.2%

-38.0%

Total EBITDA

17.7

19.6

10.5%

28.3%

21.0

22.0

4.7%

12.2%

26.7

26.7

0.0%

21.7%

Payment EBITDA margin

35.6%

36.5%

0.9%

-1.0%

35.3%

35.5%

0.2%

-1.0%

37.8%

37.2%

-0.6%

1.7%

Identity EBITDA margin

-50.6%

-43.1%

7.5%

32.5%

-18.3%

-25.0%

-6.7%

18.1%

-6.1%

-11.9%

-5.8%

13.1%

EBITDA margin

26.6%

28.4%

6.7%

1.4%

27.0%

27.8%

3.1%

-0.6%

30.1%

30.0%

-0.4%

2.2%

Normalised operating profit

13.5

15.4

13.8%

32.8%

16.2

17.2

6.1%

12.0%

21.5

21.5

0.0%

25.2%

Normalised operating margin

20.3%

22.3%

2.0%

1.8%

20.9%

21.8%

0.9%

-0.5%

24.3%

24.2%

-0.1%

2.4%

Reported operating profit

5.1

7.0

36.5%

-141.6%

7.8

8.8

12.7%

26.4%

13.1

13.1

0.0%

49.2%

Reported operating margin

7.7%

10.1%

2.4%

39.7%

10.0%

11.1%

1.1%

1.0%

14.8%

14.7%

-0.1%

3.6%

Normalised PBT

12.2

14.1

15.2%

28.4%

15.1

16.0

6.6%

13.8%

20.4

20.4

0.0%

27.1%

Reported PBT

3.8

5.7

48.5%

-132.9%

6.6

7.6

14.9%

34.1%

12.0

12.0

0.0%

57.0%

Normalised net income

9.8

11.3

15.2%

28.4%

12.0

12.8

6.6%

13.8%

16.1

16.1

0.0%

25.5%

Reported net income

3.4

5.1

48.5%

-127.3%

5.6

6.5

14.9%

26.7%

10.2

10.2

0.0%

57.0%

Normalised basic EPS ($)

0.034

0.039

13.2%

20.2%

0.042

0.043

3.0%

11.9%

0.056

0.054

-3.4%

25.5%

Normalised diluted EPS ($)

0.032

0.037

17.1%

15.0%

0.039

0.041

6.6%

11.9%

0.052

0.052

0.0%

25.5%

Reported basic EPS ($)

0.012

0.017

46.0%

-125.5%

0.020

0.022

11.0%

24.5%

0.035

0.034

-3.4%

57.0%

Net debt/(cash)

(59.7)

(62.0)

3.8%

26.4%

(80.2)

(83.2)

3.8%

34.3%

(105.5)

(108.5)

2.9%

30.4%

TPV ($bn)

8.09

8.19

1.2%

18.0%

9.15

9.30

1.6%

13.6%

10.29

10.38

0.9%

11.6%

Take rate

0.74%

0.76%

0.02%

0.01%

0.72%

0.74%

0.02%

-0.02%

0.71%

0.73%

0.02%

-0.01%

Source: Edison Investment Research

Exhibit 3: Financial summary

$'m

2017

2018

2019

2020

2021e

2022e

2023e

31-December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

24.4

35.3

50.1

56.4

68.9

79.0

89.1

Cost of Sales

(2.3)

(2.5)

(5.6)

(4.9)

(6.1)

(8.0)

(9.9)

Gross Profit

22.1

32.8

44.6

51.5

62.8

71.0

79.2

EBITDA

 

 

(2.3)

6.3

10.7

15.3

19.6

22.0

26.7

Normalised operating profit

 

 

(4.0)

4.8

4.5

11.6

15.4

17.2

21.5

Amortisation of acquired intangibles

(1.3)

(1.3)

(1.6)

(2.2)

(2.9)

(2.9)

(2.9)

Exceptionals

(2.2)

(1.4)

(0.3)

(21.1)

0.0

0.0

0.0

Share-based payments

(1.5)

(4.6)

(6.8)

(4.9)

(5.5)

(5.5)

(5.5)

Reported operating profit

(9.0)

(2.4)

(4.1)

(16.7)

7.0

8.8

13.1

Net Interest

(2.4)

(0.6)

(0.4)

(0.6)

(1.3)

(1.2)

(1.1)

Joint ventures & associates (post tax)

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Exceptionals

(17.1)

0.0

0.0

0.0

0.0

0.0

0.0

Profit Before Tax (norm)

 

 

(6.4)

4.3

4.1

11.0

14.1

16.0

20.4

Profit Before Tax (reported)

 

 

(28.5)

(3.0)

(1.3)

(17.3)

5.7

7.6

12.0

Reported tax

(0.1)

(1.3)

1.7

(1.5)

(0.6)

(1.1)

(1.8)

Profit After Tax (norm)

(4.8)

3.4

3.2

8.8

11.3

12.8

16.1

Profit After Tax (reported)

(28.7)

(4.3)

0.4

(18.8)

5.1

6.5

10.2

Minority interests

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

Net income (normalised)

(4.8)

3.4

3.2

8.8

11.3

12.8

16.1

Net income (reported)

(28.7)

(4.3)

0.4

(18.8)

5.1

6.5

10.2

Basic average number of shares outstanding (m)

150.3

217.1

246.8

273.8

292.6

297.6

297.6

EPS - basic normalised ($)

 

 

(0.03)

0.02

0.01

0.03

0.04

0.04

0.05

EPS - diluted normalised ($)

 

 

(0.03)

0.02

0.01

0.03

0.04

0.04

0.05

EPS - basic reported ($)

 

 

(0.19)

(0.02)

0.00

(0.07)

0.02

0.02

0.03

Dividend ($)

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Revenue growth (%)

42.0

44.5

42.2

12.5

22.1

14.6

12.8

Gross Margin (%)

90.7

92.9

88.9

91.3

91.2

89.9

88.9

EBITDA Margin (%)

(9.5)

17.9

21.3

27.1

28.4

27.8

30.0

Normalised Operating Margin

(16.5)

13.7

9.0

20.5

22.3

21.8

24.2

BALANCE SHEET

Fixed Assets

 

 

26.9

23.0

52.2

69.8

66.9

62.5

57.0

Intangible Assets

25.8

22.5

46.8

65.6

63.2

59.9

56.2

Tangible Assets

0.4

0.3

3.5

3.8

2.8

1.8

0.8

Investments & other

0.7

0.3

1.8

0.5

0.9

0.8

(0.0)

Current Assets

 

 

79.3

84.0

89.2

155.2

208.3

248.1

290.9

Stocks

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Debtors

59.1

51.7

53.6

92.5

134.0

153.7

172.5

Cash & cash equivalents

18.7

31.1

34.7

61.3

73.0

93.0

117.0

Other

1.4

1.3

0.9

1.4

1.4

1.4

1.4

Current Liabilities

 

 

(78.0)

(79.6)

(81.8)

(139.7)

(180.5)

(205.1)

(228.0)

Creditors

(75.5)

(77.4)

(78.0)

(136.8)

(179.0)

(203.5)

(226.3)

Tax and social security

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Short term borrowings

(2.5)

(2.2)

(2.1)

(1.4)

(1.4)

(1.4)

(1.4)

Other

(0.0)

0.0

(1.7)

(1.4)

(0.0)

(0.1)

(0.2)

Long Term Liabilities

 

 

(0.2)

(0.8)

(2.6)

(13.6)

(12.4)

(11.1)

(9.9)

Long term borrowings

(0.0)

0.0

0.0

(10.8)

(9.6)

(8.3)

(7.1)

Other long term liabilities

(0.1)

(0.8)

(2.6)

(2.8)

(2.8)

(2.8)

(2.8)

Net Assets

 

 

28.0

26.6

57.0

71.8

82.4

94.4

110.0

Minority interests

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Shareholders' equity

 

 

28.0

26.6

57.0

71.8

82.4

94.4

110.0

CASH FLOW

Op Cash Flow before WC and tax

(2.3)

6.3

7.4

15.3

19.6

22.0

26.7

Working capital

1.0

7.2

3.0

20.1

0.8

4.8

4.0

Exceptional & other

(5.5)

0.2

(1.3)

(3.8)

0.0

0.0

0.0

Tax

0.0

(0.2)

(0.1)

(0.3)

(1.0)

(1.0)

(1.0)

Net operating cash flow

 

 

(6.8)

13.5

9.0

31.3

19.4

25.8

29.7

Capex

(0.3)

(0.3)

(2.1)

(3.4)

(3.2)

(2.8)

(2.8)

Acquisitions/disposals

0.0

(0.2)

(0.7)

(36.6)

0.0

0.0

0.0

Net interest

(0.9)

(0.6)

(0.4)

(1.0)

(1.2)

(1.1)

(1.1)

Equity financing

19.8

0.5

0.6

26.2

0.0

0.0

0.0

Dividends

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Other

(1.1)

0.2

(1.5)

(2.6)

(2.1)

(0.6)

(0.6)

Net Cash Flow

10.6

13.1

4.857

13.8

12.9

21.3

25.3

Opening net debt/(cash)

 

 

9.9

(16.2)

(28.9)

(32.6)

(49.0)

(62.0)

(83.2)

FX

0.4

(0.5)

(1.1)

1.3

0.0

0.0

0.0

Other non-cash movements

15.1

(0.0)

(0.0)

1.2

0.0

0.0

0.0

Closing net debt/(cash)

 

 

(16.2)

(28.9)

(32.6)

(49.0)

(62.0)

(83.2)

(108.5)

Source: Boku, Edison Investment Research

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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.

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

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

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United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). 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

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

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.

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

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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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