Last close As at 05/08/2026
GBP1.08
▲ 4.00 (3.86%)
Market capitalisation
GBP309m
Research: TMT
Boku’s direct carrier billing platform offers an alternative customer acquisition route for digital content merchants. Use of Boku’s platform has boosted subscriber numbers for customers such as Spotify due to its ease of use. The company is well positioned to benefit from the growth of digital content, as well as from connecting its existing merchants to additional carriers in multiple countries. Today’s trading update confirms that there is strong and growing demand for the Boku platform and that the company has now reached EBITDA profitability on a run rate basis.
Boku |
Mobile payment platform for digital content
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23 January 2018 |
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Boku is a research client of Edison Investment Research Limited |
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Boku’s direct carrier billing platform offers an alternative customer acquisition route for digital content merchants. Use of Boku’s platform has boosted subscriber numbers for customers such as Spotify due to its ease of use. The company is well positioned to benefit from the growth of digital content, as well as from connecting its existing merchants to additional carriers in multiple countries. Today’s trading update confirms that there is strong and growing demand for the Boku platform and that the company has now reached EBITDA profitability on a run rate basis.
Scale play in direct carrier billing
Boku is the largest independent provider of direct carrier billing (DCB) services. DCB is an alternative payment mechanism that enables consumers to pay for (mainly) digital goods and services via their mobile phones, whether they are on a pre-paid or post-paid contract. Boku has an impressive roster of merchants already using its service, including Apple, Facebook, Google, Microsoft, Sony and Spotify. From the merchant’s perspective, offering DCB provides access to consumers that either do not have a credit or debit card, or prefer not to use them online. It can also provide a faster and simpler way to pay, removing friction in the payment process. Boku should benefit from market growth in digital content (eg music, games, video) as well as growth in the number of carriers connected to each merchant.
Strong trading update
Boku has confirmed that trading further strengthened in Q417, and expects to report FY17 revenues of $24-24.5m (+40% y-o-y). The company processed transactions (TPV) worth $1.7bn in FY17 (H1 $0.6m, H2 $1.1bn), versus $544m in FY16. As lower margin transaction-based revenues are growing faster than higher margin settlement-based revenues, TPV growth outpaces revenue growth; despite this, the pace of TPV growth in the medium term should drive material revenue growth over FY18 and FY19. With positive adjusted EBITDA expected in H217, the company is well on the way to generating positive cash flows. Cash at the end of FY17 stood at $20m, providing ample funds to support the business until cash flow break-even and to fund development, whether internally or via acquisition.
Valuation: Reflects strong growth prospects
Boku is currently trading on an EV/sales multiple of 10.0x FY17e and 7.3x FY18e, and an EV/EBITDA multiple of 54.2x FY18e. Forecast strong growth in revenue and profitability should bring these multiples down to more normal levels from FY19.
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Consensus estimates
Source: Boku, Bloomberg |
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Disclaimer
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Disclaimer
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Learning Technologies Group (LTG) has released a strong trading update with FY17 profits and year-end net cash comfortably ahead of consensus. The update indicates that operating margins were c 190bp ahead of our forecasts, with net cash £7.9m ahead. However, we are maintaining our FY18/FY19 forecasts, which were recently updated in our monthly book. In October, LTG announced its objective to double run-rate revenues to £100m and achieve run-rate EBIT of at least £25m by the end of 2020. While the shares look punchy on c 37x our FY18 EPS, the business is attractively positioned in an industry growing at 15-20% and we note that sustainable high-teen growth opportunities are hard to find across the broader market.