Boku — Local payment method growth accelerates

Boku (AIM: BOKU)

Currency in GBP

Last close As at 02/02/2023

GBP1.48

−3.50 (−2.31%)

Market capitalisation

GBP439m

Research: TMT

Boku — Local payment method growth accelerates

Boku expects to report FY22 revenue and EBITDA slightly ahead of our forecasts and closes the year with stronger than expected net cash. Total payment volume (TPV) was 20% higher y-o-y in constant currency and year-end monthly active users (MAUs) grew 28% y-o-y, helped by the growing contribution from local payment methods (LPMs). We revise our forecasts to reflect stronger revenue growth, with more limited upgrades to EBITDA as we expect gross profit upside to be invested in further expanding and supporting the company’s network of LPMs.

Katherine Thompson

Written by

Katherine Thompson

Director

Boku_resized

TMT

Boku

Local payment method growth accelerates

FY22 trading update

Software and comp services

17 January 2023

Price

147.5p

Market cap

£439m

$1.22:£1

Net cash ($m) at end FY22

116.3

Shares in issue

297.7m

Free float

93%

Code

BOKU

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

6.2

9.1

(21.2)

Rel (local)

2.8

(3.1)

(20.9)

52-week high/low

173p

77p

Business description

Boku operates a billing platform that connects merchants with mobile network operators and alternative payment methods in more than 90 countries. It has c 350 employees, with its main offices in the US, UK, Estonia, Germany and India.

Next events

Capital markets day

22 February

FY22 results

21 March

Analyst

Katherine Thompson

+44 (0)20 3077 5700

Boku is a research client of Edison Investment Research Limited

Boku expects to report FY22 revenue and EBITDA slightly ahead of our forecasts and closes the year with stronger than expected net cash. Total payment volume (TPV) was 20% higher y-o-y in constant currency and year-end monthly active users (MAUs) grew 28% y-o-y, helped by the growing contribution from local payment methods (LPMs). We revise our forecasts to reflect stronger revenue growth, with more limited upgrades to EBITDA as we expect gross profit upside to be invested in further expanding and supporting the company’s network of LPMs.

Year
end

Revenue ($m)

EBITDA*
($m)

Diluted EPS*
($)

DPS
($)

P/E
(x)

EV/EBITDA
(x)

12/20

56.4

15.3

0.032

0.0

56.1

27.5

12/21

62.1

22.9

0.047

0.0

38.3

18.3

12/22e

63.3

20.0

0.040

0.0

44.6

20.9

12/23e

72.1

23.0

0.045

0.0

39.9

18.2

Note: *EBITDA and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. FY20 includes Identity business (sold Q122).

FY22 revenue +14% in constant currency

Boku expects to report FY22 revenue of at least $63.3m versus our $62.5m forecast, implying reported revenue growth of 2% and 14% in constant currency (H222 +19% y-o-y in constant currency). Adjusted EBITDA of at least $20m is slightly ahead of our $19.7m forecast, with revenue upside invested in Boku’s mobile-first network. TPV of $8.9bn was in line with our forecast and the 0.71% take rate was ahead of our 0.70% forecast. Year-end cash of $116.3m benefited from slower settlement with merchants over the Christmas period. Average daily cash in December 2022 was $98.8m, up from $63.3m in June 2022; $50.4m of year-end cash is Boku’s ‘own cash’ with the balance being merchant cash in transit.

Local payment methods driving volume growth

MAUs increased 28% y-o-y to close the year at 52.3m, of which LPMs made up 7%, up from 5% at end-H122 and 3% at end-FY21. Boku saw an eightfold increase in volumes processed from LPMs year-on-year, helped by c 50 LPM launches in the year, including Alipay and WeChat Pay in China for a global gaming merchant. Boku now has LPM connections in 19 countries. The recently signed agreement with Amazon should start to contribute to LPM volumes in FY23 with a more material effect in FY24. We have revised our forecasts to reflect FY22 trading, with revenue upgrades for FY22–24, while EBITDA forecasts reflect increased investment in Boku’s mobile-first network, particularly to support LPMs.

Valuation: LPMs key to upside

The stock has recovered from its low of 77p in September 2022 and now trades on an EV/EBITDA multiple of 20.9x FY22e, a 16% discount to its payment processing peer group. Applying the average multiple for FY22e would imply a share price of 169p. In our view, evidence that strong constant currency revenue growth can be sustained will be the main catalyst for the share price, with a growing contribution from LPMs and new major merchants signing up key indicators of progress.

FY22 trading update

The table below summarises the key metrics for FY22 trading. The company’s mobile-first network now covers 7.3bn end-user accounts, of which 45% are non-DCB (direct carrier billing). During FY22, the company launched 150 connections for merchants, with c 50 for LPMs and more than 30 for bundling programmes.

Exhibit 1: FY22 trading highlights

FY22a

FY22e

FY21

Growth y-o-y

Growth constant currency

TPV

$8.9bn

$8.9bn

$8.2bn

8%

20%

Take rate

0.71%

0.70%

0.75%

-0.04%

Revenue

$63.3m

$62.5m

$62.1m

2%

14%

Adjusted EBITDA

At least $20m

$19.7m

$22.9m

-13%

Monthly active users (MAU)

52.3m

41.0m

28%

N/A

New users

56.7m

58.1m

-2%

N/A

Local Payment Methods (LPM):

MAUs

3.8m

1.1m

230%

New users

8.4m

2.8m

200%

LPM MAU/Total MAU

7%

3%

LPM new users/total new users

15%

5%

Net cash

$116.3m

$82.8m

$48.8m

138%

Source: Boku, Edison Investment Research. Note: For continuing operations only (Identity business sold in Q122 accounted for in discontinued operations).

Changes to forecasts

We have revised our forecasts to reflect the FY22 trading update. We have increased our FY22 revenue forecast by 2% to reflect a slightly higher take rate. We assume that operating costs were slightly ahead of our forecast, resulting in EBITDA of $20m.

During FY22, the company saw a large negative effect on revenue and TPV from the strength of the US dollar against the main currencies that Boku trades in (Japanese yen, euro, UK sterling, South Korean won and Taiwan dollar). US dollar exchange rates peaked in September/October 2022 and have since declined by more than 10% for most currencies, which should result in a more limited currency effect in FY23.

We have increased our revenue forecasts for FY23 and FY24, reflecting slightly higher take rates due to the growth of LPM volumes, which earn take rates above the group average. We assume that revenue upside is reinvested in the business, particularly to strengthen the company’s regulatory position, which in our view is a key competitive advantage. Boku already has regulated payment capabilities in more than 50 markets, having recently been granted a payments licence in the Philippines, and is in the final stages of obtaining a licence in Malaysia.

We have increased our net cash forecasts to reflect the stronger position at the end of FY22, assuming that working capital (particularly merchant settlement) follows similar patterns to FY22 in FY23 and FY24.

Exhibit 2: Changes to forecasts

$'m

FY22e

FY22e

FY23e

FY23e

FY24e

FY24e

Old

New

Change

y-o-y

Old

New

Change

y-o-y

Old

New

Change

y-o-y

Revenue

62.5

63.3

1.3%

2.0%

69.6

72.1

3.6%

13.8%

76.9

82.0

6.6%

13.8%

Gross profit

60.4

61.2

1.3%

1.1%

67.1

69.5

3.6%

13.6%

74.2

79.1

6.6%

13.8%

Gross margin

96.6%

96.6%

0.0%

-0.9%

96.4%

96.4%

0.0%

-0.2%

96.4%

96.4%

0.0%

0.0%

EBITDA

19.7

20.0

1.6%

-12.6%

22.7

23.0

1.3%

15.0%

26.4

26.9

2.0%

16.8%

EBITDA margin

31.5%

31.6%

0.2%

-5.3%

32.7%

31.9%

-2.2%

0.3%

34.3%

32.8%

-4.4%

0.9%

Normalised operating profit

15.7

16.0

2.0%

-13.8%

17.7

18.0

1.7%

12.5%

20.9

21.4

2.5%

18.7%

Normalised operating margin

25.1%

25.3%

0.2%

-4.6%

25.5%

25.0%

-0.5%

-0.3%

27.1%

26.1%

-1.1%

1.1%

Reported operating profit

8.6

8.9

3.6%

-16.6%

10.3

10.6

2.9%

19.4%

13.5

14.0

3.9%

31.9%

Reported operating margin

13.7%

14.0%

0.3%

-3.1%

14.8%

14.7%

-0.1%

0.7%

17.5%

17.0%

-0.4%

2.3%

Normalised PBT

15.2

15.5

2.0%

-13.3%

17.4

17.7

1.7%

14.5%

20.6

21.1

2.5%

19.1%

Reported PBT

8.0

8.3

3.8%

-15.9%

10.0

10.3

3.0%

23.6%

13.1

13.7

4.0%

32.9%

Normalised net income

12.1

12.4

2.0%

-13.3%

13.8

14.0

1.7%

13.1%

16.2

16.7

2.5%

19.1%

Reported net income

31.7

32.0

0.8%

410.4%

8.5

8.7

3.0%

-72.7%

11.2

11.6

4.0%

32.9%

Normalised basic EPS ($)

0.041

0.042

2.0%

-14.3%

0.046

0.047

1.7%

12.0%

0.054

0.055

2.5%

17.9%

Normalised diluted EPS ($)

0.040

0.040

2.0%

-14.2%

0.044

0.045

1.7%

12.0%

0.052

0.053

2.5%

17.9%

Reported basic EPS ($)

0.107

0.108

0.8%

404.6%

0.028

0.029

3.0%

-73.0%

0.037

0.038

4.0%

31.6%

Net debt/(cash)

(82.8)

(116.3)

40.5%

138.1%

(106.0)

(134.2)

26.6%

15.4%

(126.2)

(158.4)

25.5%

18.1%

TPV ($bn)

8.94

8.87

-0.8%

7.7%

10.00

9.91

-0.9%

11.8%

10.99

11.12

1.2%

12.2%

Take rate

0.70%

0.71%

0.02%

-0.04%

0.70%

0.73%

0.03%

0.01%

0.70%

0.74%

0.04%

0.01%

Source: Edison Investment Research


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

62.1

63.3

72.1

82.0

Cost of Sales

(2.3)

(2.5)

(5.6)

(4.9)

(1.6)

(2.1)

(2.6)

(2.9)

Gross Profit

22.1

32.8

44.6

51.5

60.5

61.2

69.5

79.1

EBITDA

 

 

(2.3)

6.3

10.7

15.3

22.9

20.0

23.0

26.9

Normalised operating profit

 

 

(4.0)

4.8

4.5

11.6

18.6

16.0

18.0

21.4

Amortisation of acquired intangibles

(1.3)

(1.3)

(1.6)

(2.2)

(1.9)

(1.4)

(1.4)

(1.4)

Exceptionals

(2.2)

(1.4)

(0.3)

(21.1)

0.4

(0.8)

0.0

0.0

Share-based payments

(1.5)

(4.6)

(6.8)

(4.9)

(6.4)

(4.9)

(6.0)

(6.0)

Reported operating profit

(9.0)

(2.4)

(4.1)

(16.7)

10.6

8.9

10.6

14.0

Net Interest

(2.4)

(0.6)

(0.4)

(0.6)

(0.7)

(0.6)

(0.3)

(0.3)

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

17.8

15.5

17.7

21.1

Profit Before Tax (reported)

 

 

(28.5)

(3.0)

(1.3)

(17.3)

9.9

8.3

10.3

13.7

Reported tax

(0.1)

(1.3)

1.7

(1.5)

1.9

(0.9)

(1.5)

(2.0)

Profit After Tax (norm)

(4.8)

3.4

3.2

8.8

14.3

12.4

14.0

16.7

Profit After Tax (reported)

(28.7)

(4.3)

0.4

(18.8)

11.8

7.4

8.7

11.6

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

(5.5)

24.6

0.0

0.0

Net income (normalised)

(4.8)

3.4

3.2

8.8

14.3

12.4

14.0

16.7

Net income (reported)

(28.7)

(4.3)

0.4

(18.8)

6.3

32.0

8.7

11.6

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

0.05

0.04

0.05

0.05

EPS - diluted normalised ($)

 

 

(0.03)

0.02

0.01

0.03

0.05

0.04

0.05

0.05

EPS - basic reported ($)

 

 

(0.19)

(0.02)

0.00

(0.07)

0.02

0.11

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

10.1

2.0

13.8

13.8

Gross Margin (%)

90.7

92.9

88.9

91.3

97.5

96.6

96.4

96.4

EBITDA Margin (%)

(9.5)

17.9

21.3

27.1

36.9

31.6

31.9

32.8

Normalised Operating Margin

(16.5)

13.7

9.0

20.5

29.9

25.3

25.0

26.1

BALANCE SHEET

Fixed Assets

 

 

26.9

23.0

52.2

69.8

71.9

67.0

67.2

66.7

Intangible Assets

25.8

22.5

46.8

65.6

63.1

58.4

59.2

59.7

Tangible Assets

0.4

0.3

3.5

3.8

5.7

5.5

5.4

5.4

Investments & other

0.7

0.3

1.8

0.5

3.1

3.2

2.6

1.6

Current Assets

 

 

79.3

84.0

89.2

155.2

145.0

216.5

241.6

275.0

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

94.4

101.6

110.8

Cash & cash equivalents

18.7

31.1

34.7

61.3

56.7

116.3

134.2

158.4

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)

(160.1)

(170.6)

(185.9)

Creditors

(75.5)

(77.4)

(78.0)

(136.8)

(119.6)

(158.6)

(169.1)

(184.3)

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

117.8

132.5

150.1

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

117.8

132.5

150.1

CASH FLOW

Op Cash Flow before WC and tax

(2.3)

6.3

7.4

15.3

22.9

20.0

23.0

26.9

Working capital

1.0

7.2

3.0

20.1

(7.1)

33.3

(2.9)

6.1

Exceptional & other

(5.5)

0.2

(1.3)

(3.8)

0.8

(1.0)

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

16.2

51.2

19.2

32.0

Capex

(0.3)

(0.3)

(2.1)

(3.4)

(5.8)

(5.6)

(6.0)

(6.3)

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)

(0.5)

(0.2)

(0.2)

Equity financing

19.8

0.5

0.6

26.2

1.1

(1.6)

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)

(1.2)

(1.2)

(1.2)

Net Cash Flow

10.6

13.1

4.857

13.8

4.8

68.6

17.9

24.3

Opening net debt/(cash)

 

 

9.9

(16.2)

(28.9)

(32.6)

(49.0)

(48.8)

(116.3)

(134.2)

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

(4.4)

(1.1)

0.0

0.0

Closing net debt/(cash)

 

 

(16.2)

(28.9)

(32.6)

(49.0)

(48.8)

(116.3)

(134.2)

(158.4)

Source: Boku, Edison Investment Research


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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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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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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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Midatech Pharma — Planned dose-escalation commences in rGBM study

Midatech has announced that following the completion of one month of treatment for the first patient enrolled in the MAGIC-G1 study (at a dose of 60uM), the Data Safety Monitoring Board (DSMB) has recommended dose escalation to 90uM (expected to be the target therapeutic dose for MTX110). MAGIC-G1 is an open-label, Phase I study designed to evaluate the feasibility and safety of MTX110 in recurrent glioblastoma (rGBM) using a convection-enhanced delivery (CED) system. However, we note that continued progression of this study will be contingent on the successful conclusion of the announced Bioasis deal and US$9.6m fund-raising, both of which require shareholder authorisation. Approval and completion of these is critical path for Midatech. The company states that it has a cash balance of £2.6m (as of 5 January 2023), which is only sufficient to fund operations to mid-March 2023.

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