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Currency in GBP
Last close As at 09/06/2023
GBP1.48
▲ −0.50 (−0.34%)
Market capitalisation
GBP439m
Research: TMT
While currency headwinds reduced growth on a reported basis in H122, Boku expects to report constant currency growth of 14% for total payment volume (TPV) and 7% for Payment revenue. Local payment methods (LPMs) are seeing rapid adoption and are making up a growing proportion of volumes (up 11x y-o-y) and monthly active users (MAUs – up 8x y-o-y). On revised forecasts which reflect the stronger dollar, the stock trades at a large discount to peers. We expect this gap to close as LPMs start to make a material contribution to revenue growth.
Boku |
Currency moves mask underlying growth |
H122 trading update |
Software and comp services |
27 July 2022 |
Share price performance
Business description
Next events
Analyst
Boku is a research client of Edison Investment Research Limited |
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While currency headwinds reduced growth on a reported basis in H122, Boku expects to report constant currency growth of 14% for total payment volume (TPV) and 7% for Payment revenue. Local payment methods (LPMs) are seeing rapid adoption and are making up a growing proportion of volumes (up 11x y-o-y) and monthly active users (MAUs – up 8x y-o-y). On revised forecasts which reflect the stronger dollar, the stock trades at a large discount to peers. We expect this gap to close as LPMs start to make a material contribution to revenue growth.
Year |
Revenue ($m) |
EBITDA* |
Diluted EPS* |
DPS |
P/E |
EV/EBITDA |
12/20 |
56.4 |
15.3 |
3.2 |
0.0 |
33.1 |
15.5 |
12/21 |
69.2 |
20.0 |
3.9 |
0.0 |
27.5 |
11.8 |
12/22e |
62.5 |
19.7 |
4.0 |
0.0 |
26.8 |
12.0 |
12/23e |
69.6 |
22.7 |
4.4 |
0.0 |
24.0 |
10.4 |
Note: *EBITDA and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. FY20/21 include Identity business (sold in Q122).
Stronger dollar creates currency headwinds
Boku expects to report H122 revenue of at least $30.3m, down 1% versus H121 Payments revenue, but 7% higher on a constant currency basis. The dollar has strengthened significantly against the main currencies in which Boku generates revenue, providing a significant headwind in H122 and we also expect in H222. We also note that Boku benefited from a COVID boost in Q121. While natural hedging partially mitigated the top-line drop through to profitability, H122 EBITDA of $9.5m (H121: $11.1m) includes a $2m negative currency impact. We have revised our forecasts to reflect the stronger dollar in FY22, resulting in a 7.5% cut to revenue and a 10.5% cut to EBITDA, although the effect is much lower at the normalised operating profit and EPS level, down 2.3% and 2.4% respectively.
Rapid adoption of local payment methods
Local payment methods (eWallets and real-time payments) are growing contributors to volumes (up 11x y-o-y) and MAUs (up 8x y-o-y), making up 4.5% of MAUs in June and 10.8% of new users in H122. These methods give merchants access to customers in regions where Boku’s direct carrier billing may not be available or where these alternative methods of payment are more popular. These payment methods have the added benefit of widening the addressable market of goods that can be paid for beyond digital content.
Valuation: Large discount to peers
Down 46% year to date, Boku is trading on EV/EBITDA multiples of 12.0x FY22e and 10.4x FY23e, at a c 50% discount to the payment processing peer averages (which are down on average 24% year to date). Applying the average multiple for FY22e would imply a share price of 172.6p and 146.5p for FY23e. In our view, evidence that strong revenue growth can be sustained will be the main catalyst for the share price, with a growing contribution from local payment methods and new major merchants signing up key indicators.
H122 trading update
Exhibit 1: Summary of H122 trading update metrics
H122 |
H121* |
Growth y-o-y |
Growth constant currency |
|
Total payment volume (TPV) |
$4.4bn |
$4.0bn |
10% |
14% |
Revenue |
At least $30.3m |
$30.7m |
-1% |
7% |
EBITDA |
$9.5m |
$11.1m |
-14% |
4% |
Monthly active users (MAU) |
46.3m |
37.9m |
22% |
N/A |
New users |
28.8m |
N/A |
||
Local payment methods (LPM): |
||||
MAUs |
>2.1m |
0.23m |
800% |
|
New users |
3.1m |
0.44m |
600% |
|
LPM MAU/total MAU |
4.5% |
0.6% |
||
LPM new users/total new users |
10.8% |
N/A |
||
Take rate |
0.69% |
0.77% |
Source: Boku, Edison Investment Research *Payments business only (Identity business sold in Q122)
Currency moves mask underlying performance
Boku expects to report revenue of at least $30.3m for H122, 1% lower than Payments revenue reported in H121. While Boku reports in US dollars, the vast majority of its revenues are generated in other currencies. Asian currencies (most significantly Japanese yen, Taiwanese dollar and Korean won) make up more than half of revenues, followed by euro (c 15%) and sterling (c 7%). In H122, the US dollar strengthened by roughly 10% against these currencies and for H222, the effect is likely to be even more pronounced. The company has calculated that on a constant currency basis, revenue was 7% higher year-on-year. We note that H121 was always going to be a tough comparison period as the company benefited from a boost in Q121 due to another COVID lockdown.
TPV for H122 was $4.4bn, representing 10% growth on a reported basis and 14% on a constant currency basis. We estimate that the take rate declined from 0.77% in H121 to 0.69% in H122 due to to the mix of settlement versus transaction volumes.
Boku expects to report H122 EBITDA of $9.5m compared to $11.1m for Payments in H121. While there is some natural hedging for costs in the UK and Europe, a material proportion of costs are generated in the US and India, resulting in a currency headwind of $2m in the period.
As a reminder, the Identity business was sold in March 2022 for total proceeds of $32.3m ($26.2m cash upfront and $6.1m cash deferred for up to 18 months). The company expects to report a net profit on disposal of $24.0m ($26.8m profit on disposal less related costs of $2.8m). For H122, Boku expects to report group profit before tax (PBT) of $29.5m, which includes the $24.0m net profit on disposal of the Identity business.
At the end of H122, Boku had cash of $67.8m and had repaid all debt. This compares to net cash of $48.8m at the end of FY21 and $40.2m at the end of H121. Average daily cash during June 2022 was $63.3m compared to $50.8m in December 2021 and $38.0m in June 2021.
Local payment methods show strong growth
Newer LPMs such as eWallets and real-time payments continue to make up a growing proportion of total payment volumes, MAUs and new users. Volumes from these payment methods increased 11 times year-on-year, MAUs eight times and new users six times compared to H121. LPM users made up 4.5% of MAUs in June 2022 compared to 0.6% in June 2021 and made up 10.8% of new users in H122. Stripping out LPM users, underlying MAUs increased 17% y-o-y.
Changes to forecasts
We have revised our forecasts to take account of the trading update and the effect of currency. With the lower share price year to date, we reduce our share-based payments estimates. We have also reduced our depreciation and amortisation forecasts to reflect the disposal of the Identity business.
While our FY22 forecast implies 2.5% revenue growth in H222 on a reported basis, we estimate this is closer to 17% growth on a constant currency basis. While a large proportion of the revenue reduction drops through to EBITDA, our normalised operating profit and EPS forecasts are less affected, as we have reduced our depreciation and amortisation forecasts.
Exhibit 2: Changes to forecasts
$'m |
FY22e |
FY23e |
FY24e |
||||||||||
Old |
New |
Change |
y-o-y |
Old |
New |
Change |
y-o-y |
Old |
New |
Change |
y-o-y |
||
Payment revenues |
67.5 |
62.5 |
-7.5% |
0.7% |
74.6 |
69.6 |
-6.7% |
11.4% |
81.5 |
76.9 |
-5.6% |
10.5% |
|
Identity revenues |
0.0 |
0.0 |
N/A |
-100.0% |
0.0 |
0.0 |
N/A |
N/A |
0.0 |
0.0 |
N/A |
N/A |
|
Total revenues |
67.5 |
62.5 |
-7.5% |
-9.7% |
74.6 |
69.6 |
-6.7% |
11.4% |
81.5 |
76.9 |
-5.6% |
10.5% |
|
Gross profit |
65.1 |
60.3 |
-7.5% |
-5.0% |
71.9 |
67.1 |
-6.7% |
11.4% |
78.6 |
74.2 |
-5.6% |
10.5% |
|
Gross margin |
96.4% |
96.4% |
0.0% |
4.7% |
96.4% |
96.4% |
0.0% |
0.0% |
96.4% |
96.4% |
0.0% |
0.0% |
|
Payment EBITDA |
22.0 |
19.7 |
-10.5% |
-14.0% |
26.2 |
22.7 |
-13.4% |
15.4% |
29.5 |
26.4 |
-10.5% |
16.1% |
|
Identity EBITDA |
0.0 |
0.0 |
N/A |
N/A |
0.0 |
0.0 |
N/A |
N/A |
0.0 |
0.0 |
NA |
N/A |
|
Total EBITDA |
22.0 |
19.7 |
-10.5% |
-1.6% |
26.2 |
22.7 |
-13.4% |
15.4% |
29.5 |
26.4 |
-10.5% |
16.1% |
|
Payment EBITDA margin |
32.6% |
31.5% |
-1.1% |
-5.4% |
35.2% |
32.7% |
-2.5% |
1.1% |
36.2% |
34.3% |
-1.9% |
1.6% |
|
Identity EBITDA margin |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
|
EBITDA margin |
32.6% |
31.5% |
-3.3% |
2.6% |
35.2% |
32.7% |
-7.2% |
1.1% |
36.2% |
34.3% |
-5.2% |
1.6% |
|
Normalised operating profit |
16.1 |
15.7 |
-2.3% |
1.8% |
18.6 |
17.7 |
-4.8% |
12.9% |
22.9 |
20.9 |
-8.7% |
17.8% |
|
Normalised operating margin |
23.8% |
25.1% |
1.3% |
2.8% |
25.0% |
25.5% |
0.5% |
0.3% |
28.1% |
27.2% |
-0.9% |
1.7% |
|
Reported operating profit |
5.2 |
9.7 |
86.7% |
89.0% |
7.7 |
9.9 |
28.3% |
2.4% |
12.0 |
13.1 |
9.1% |
31.7% |
|
Reported operating margin |
7.7% |
15.5% |
7.8% |
8.1% |
10.4% |
14.3% |
3.9% |
-1.3% |
14.7% |
17.0% |
2.3% |
2.7% |
|
Normalised PBT |
15.6 |
15.2 |
-2.4% |
3.8% |
18.2 |
17.4 |
-4.9% |
14.0% |
22.5 |
20.5 |
-8.8% |
18.2% |
|
Reported PBT |
4.7 |
9.2 |
95.6% |
110.3% |
7.4 |
9.6 |
29.8% |
3.6% |
11.6 |
12.7 |
9.4% |
33.0% |
|
Normalised net income |
12.5 |
12.2 |
-2.4% |
3.8% |
14.4 |
13.7 |
-4.9% |
12.6% |
17.8 |
16.2 |
-8.8% |
18.2% |
|
Reported net income* |
31.0 |
30.8 |
-0.5% |
392.0% |
6.3 |
8.1 |
29.8% |
-73.7% |
9.9 |
10.8 |
9.4% |
33.0% |
|
Normalised basic EPS ($) |
0.042 |
0.041 |
-2.4% |
2.6% |
0.048 |
0.046 |
-4.9% |
11.5% |
0.059 |
0.053 |
-8.8% |
17.0% |
|
Normalised diluted EPS ($) |
0.041 |
0.040 |
-2.4% |
2.6% |
0.046 |
0.044 |
-4.9% |
11.5% |
0.057 |
0.052 |
-8.8% |
17.0% |
|
Reported basic EPS ($) |
0.104 |
0.104 |
-0.5% |
386.4% |
0.021 |
0.027 |
29.8% |
-73.7% |
0.033 |
0.036 |
9.4% |
31.7% |
|
Net debt/(cash) |
(88.3) |
(82.3) |
-6.7% |
68.6% |
(115.3) |
(106.6) |
-7.6% |
29.5% |
(139.7) |
(127.9) |
-8.5% |
20.0% |
|
TPV ($bn) |
9.20 |
9.06 |
-1.5% |
10.1% |
10.30 |
10.12 |
-1.7% |
11.7% |
11.28 |
11.11 |
-1.6% |
9.7% |
|
Take rate |
0.73% |
0.69% |
-0.04% |
-0.06% |
0.72% |
0.69% |
-0.04% |
0.00% |
0.72% |
0.69% |
-0.03% |
0.00% |
|
Source: Edison Investment Research. Note: *Reported net income in FY22 includes contribution from discontinued operations (Identity business sold in Q122).
Exhibit 3: Financial summary
$m |
2017 |
2018 |
2019 |
2020 |
2021 |
2022e |
2023e |
2024e |
||
31-December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
INCOME STATEMENT |
||||||||||
Revenue* |
|
|
24.4 |
35.3 |
50.1 |
56.4 |
69.2 |
62.5 |
69.6 |
76.9 |
Cost of Sales |
(2.3) |
(2.5) |
(5.6) |
(4.9) |
(5.7) |
(2.2) |
(2.5) |
(2.7) |
||
Gross Profit |
22.1 |
32.8 |
44.6 |
51.5 |
63.4 |
60.3 |
67.1 |
74.2 |
||
EBITDA* |
|
|
(2.3) |
6.3 |
10.7 |
15.3 |
20.0 |
19.7 |
22.7 |
26.4 |
Normalised operating profit |
|
|
(4.0) |
4.8 |
4.5 |
11.6 |
15.4 |
15.7 |
17.7 |
20.9 |
Amortisation of acquired intangibles |
(1.3) |
(1.3) |
(1.6) |
(2.2) |
(2.9) |
(1.8) |
(1.8) |
(1.8) |
||
Exceptionals |
(2.2) |
(1.4) |
(0.3) |
(21.1) |
(0.0) |
0.0 |
0.0 |
0.0 |
||
Share-based payments |
(1.5) |
(4.6) |
(6.8) |
(4.9) |
(7.4) |
(4.2) |
(6.0) |
(6.0) |
||
Reported operating profit |
(9.0) |
(2.4) |
(4.1) |
(16.7) |
5.1 |
9.7 |
9.9 |
13.1 |
||
Net Interest |
(2.4) |
(0.6) |
(0.4) |
(0.6) |
(0.7) |
(0.5) |
(0.4) |
(0.4) |
||
Joint ventures & associates (post tax) |
0.0 |
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 |
0.0 |
||
Profit Before Tax (norm) |
|
|
(6.4) |
4.3 |
4.1 |
11.0 |
14.7 |
15.2 |
17.4 |
20.5 |
Profit Before Tax (reported) |
|
|
(28.5) |
(3.0) |
(1.3) |
(17.3) |
4.4 |
9.2 |
9.6 |
12.7 |
Reported tax |
(0.1) |
(1.3) |
1.7 |
(1.5) |
1.9 |
(1.4) |
(1.4) |
(1.9) |
||
Profit After Tax (norm) |
(4.8) |
3.4 |
3.2 |
8.8 |
11.7 |
12.2 |
13.7 |
16.2 |
||
Profit After Tax (reported) |
(28.7) |
(4.3) |
0.4 |
(18.8) |
6.3 |
7.8 |
8.1 |
10.8 |
||
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 |
23.0 |
0.0 |
0.0 |
||
Net income (normalised) |
(4.8) |
3.4 |
3.2 |
8.8 |
11.7 |
12.2 |
13.7 |
16.2 |
||
Net income (reported) |
(28.7) |
(4.3) |
0.4 |
(18.8) |
6.3 |
30.8 |
8.1 |
10.8 |
||
Basic average number of shares outstanding (m) |
150.3 |
217.1 |
246.8 |
273.8 |
294.0 |
297.4 |
300.4 |
303.4 |
||
EPS - basic normalised ($) |
|
|
(0.03) |
0.02 |
0.01 |
0.03 |
0.04 |
0.04 |
0.05 |
0.05 |
EPS - diluted normalised ($) |
|
|
(0.03) |
0.02 |
0.01 |
0.03 |
0.04 |
0.04 |
0.04 |
0.05 |
EPS - basic reported ($) |
|
|
(0.19) |
(0.02) |
0.00 |
(0.07) |
0.02 |
0.10 |
0.03 |
0.04 |
Dividend ($) |
0.00 |
0.00 |
0.00 |
0.00 |
0.00 |
0.00 |
0.00 |
0.00 |
||
Revenue growth (%) |
42.0 |
44.5 |
42.2 |
12.5 |
22.6 |
(9.7) |
11.4 |
10.5 |
||
Gross Margin (%) |
90.7 |
92.9 |
88.9 |
91.3 |
91.7 |
96.4 |
96.4 |
96.4 |
||
EBITDA Margin (%) |
(9.5) |
17.9 |
21.3 |
27.1 |
29.0 |
31.5 |
32.7 |
34.3 |
||
Normalised Operating Margin |
(16.5) |
13.7 |
9.0 |
20.5 |
22.3 |
25.1 |
25.5 |
27.2 |
||
BALANCE SHEET |
||||||||||
Fixed Assets |
|
|
26.9 |
23.0 |
52.2 |
69.8 |
71.9 |
66.6 |
65.2 |
63.4 |
Intangible Assets |
25.8 |
22.5 |
46.8 |
65.6 |
63.1 |
59.0 |
58.7 |
58.4 |
||
Tangible Assets |
0.4 |
0.3 |
3.5 |
3.8 |
5.7 |
4.9 |
4.2 |
3.6 |
||
Investments & other |
0.7 |
0.3 |
1.8 |
0.5 |
3.1 |
2.7 |
2.3 |
1.4 |
||
Current Assets |
|
|
79.3 |
84.0 |
89.2 |
155.2 |
145.0 |
181.9 |
209.9 |
237.7 |
Stocks |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Debtors |
59.1 |
51.7 |
53.6 |
92.5 |
82.6 |
93.7 |
97.5 |
104.1 |
||
Cash & cash equivalents |
18.7 |
31.1 |
34.7 |
61.3 |
56.7 |
82.3 |
106.6 |
127.9 |
||
Other |
1.4 |
1.3 |
0.9 |
1.4 |
5.8 |
5.8 |
5.8 |
5.8 |
||
Current Liabilities |
|
|
(78.0) |
(79.6) |
(81.8) |
(139.7) |
(122.1) |
(125.3) |
(137.8) |
(147.0) |
Creditors |
(75.5) |
(77.4) |
(78.0) |
(136.8) |
(119.6) |
(123.9) |
(136.3) |
(145.5) |
||
Tax and social security |
0.0 |
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) |
(1.1) |
0.0 |
0.0 |
0.0 |
||
Other |
(0.0) |
0.0 |
(1.7) |
(1.4) |
(1.3) |
(1.4) |
(1.5) |
(1.6) |
||
Long Term Liabilities |
|
|
(0.2) |
(0.8) |
(2.6) |
(13.6) |
(12.3) |
(5.7) |
(5.7) |
(5.7) |
Long term borrowings |
(0.0) |
0.0 |
0.0 |
(10.8) |
(6.7) |
0.0 |
0.0 |
0.0 |
||
Other long-term liabilities |
(0.1) |
(0.8) |
(2.6) |
(2.8) |
(5.7) |
(5.7) |
(5.7) |
(5.7) |
||
Net Assets |
|
|
28.0 |
26.6 |
57.0 |
71.8 |
82.4 |
117.5 |
131.6 |
148.4 |
Minority interests |
0.0 |
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 |
117.5 |
131.6 |
148.4 |
CASH FLOW |
||||||||||
Op Cash Flow before WC and tax |
(2.3) |
6.3 |
7.4 |
15.3 |
20.0 |
19.7 |
22.7 |
26.4 |
||
Working capital |
1.0 |
7.2 |
3.0 |
20.1 |
(7.1) |
(0.8) |
2.5 |
2.6 |
||
Exceptional & other |
(5.5) |
0.2 |
(1.3) |
(3.8) |
(0.6) |
(4.0) |
0.0 |
0.0 |
||
Tax |
0.0 |
(0.2) |
(0.1) |
(0.3) |
(0.4) |
(1.0) |
(1.0) |
(1.0) |
||
Net operating cash flow |
|
|
(6.8) |
13.5 |
9.0 |
31.3 |
11.9 |
13.9 |
24.3 |
28.0 |
Capex |
(0.3) |
(0.3) |
(2.1) |
(3.4) |
(5.8) |
(4.6) |
(5.2) |
(5.8) |
||
Acquisitions/disposals |
0.0 |
(0.2) |
(0.7) |
(36.6) |
0.0 |
26.2 |
6.1 |
0.0 |
||
Net interest |
(0.9) |
(0.6) |
(0.4) |
(1.0) |
(0.6) |
(0.4) |
(0.3) |
(0.3) |
||
Equity financing |
19.8 |
0.5 |
0.6 |
26.2 |
1.1 |
0.0 |
0.0 |
0.0 |
||
Dividends |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other |
(1.1) |
0.2 |
(1.5) |
(2.6) |
(6.1) |
(0.6) |
(0.6) |
(0.6) |
||
Net Cash Flow |
10.6 |
13.1 |
4.857 |
13.8 |
0.5 |
34.5 |
24.3 |
21.3 |
||
Opening net debt/(cash) |
|
|
9.9 |
(16.2) |
(28.9) |
(32.6) |
(49.0) |
(48.8) |
(82.3) |
(106.6) |
FX |
0.4 |
(0.5) |
(1.1) |
1.3 |
(0.6) |
0.0 |
0.0 |
0.0 |
||
Other non-cash movements |
15.1 |
(0.0) |
(0.0) |
1.2 |
(0.1) |
(1.0) |
0.0 |
0.0 |
||
Closing net debt/(cash) |
|
|
(16.2) |
(28.9) |
(32.6) |
(49.0) |
(48.8) |
(82.3) |
(106.6) |
(127.9) |
Source: Boku, Edison Investment Research *Note: In FY19-21 includes Identity business which was sold in Q122.
|
|
Research: Healthcare
Oryzon Genomics has announced that it is has entered into a partnership with the Charcot-Marie-Tooth Research Foundation (CMTRF). The collaboration will investigate the use of Oryzon’s preclinical histone deacetylase 6 (HDAC6) inhibitors for the treatment of Charcot-Marie-Tooth (CMT) disease, a rare neurodegenerative disease with no curative or symptomatic medications approved for treatment. Under the terms of the partnership, the CMTRF will fund preclinical development for a series of in vivo studies to assess two of Oryzon’s most promising HDAC6 candidates. The financing and development support from the CMTRF, we believe, could potentially expedite the progression of Oryzon’s HDAC6 assets towards clinical development, which would represent a future catalyst for share price.
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