Boku — Strong H1 drives upgrades

Boku (AIM: BOKU)

Last close As at 24/02/2024

GBP1.57

−3.50 (−2.19%)

Market capitalisation

GBP465m

More on this equity

Research: TMT

Boku — Strong H1 drives upgrades

Boku saw strong growth in total payment volume (TPV) in H123 translating to revenue growth of at least 24% (31% constant currency) and EBITDA growth of at least 25%. Local payment methods (LPMs) were a key driver of growth, pushing up the take rate to 0.76% and contributing 19% of revenue. The company also announced that CEO Jon Prideaux will be stepping down from his role at the end of the year; his successor will be Stuart Neal, who was previously CFO of Boku, providing continuity and decades of experience in the payments industry.

Katherine Thompson

Written by

Katherine Thompson

Director

TMT

Boku

Strong H1 drives upgrades

H123 trading update

Software and comp services

4 July 2023

Price

134.5p

Market cap

£401m

$1.27:£1

Net cash ($m) at end FY22*
*Excludes restricted cash of $17.0m

99.6

Shares in issue

297.8m

Free float

94.1%

Code

BOKU

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(10.3)

(1.8)

33.8

Rel (local)

(9.1)

0.0

28.7

52-week high/low

154p

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 370 employees, with its main offices in the US, UK, Estonia, Germany and India.

Next events

H123 results

September

Analyst

Katherine Thompson

+44 (0)20 3077 5700

Boku is a research client of Edison Investment Research Limited

Boku saw strong growth in total payment volume (TPV) in H123 translating to revenue growth of at least 24% (31% constant currency) and EBITDA growth of at least 25%. Local payment methods (LPMs) were a key driver of growth, pushing up the take rate to 0.76% and contributing 19% of revenue. The company also announced that CEO Jon Prideaux will be stepping down from his role at the end of the year; his successor will be Stuart Neal, who was previously CFO of Boku, providing continuity and decades of experience in the payments industry.

Year
end

Revenue
($m)

EBITDA*
($m)

Diluted EPS*
(c)

DPS
($)

P/E
(x)

EV/EBITDA
(x)

12/21

62.1

22.9

4.7

0.0

36.2

17.8

12/22

63.8

20.5

4.0

0.0

43.0

19.9

12/23e

76.8

24.9

4.9

0.0

35.1

16.4

12/24e

86.9

29.0

5.8

0.0

29.3

14.1

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

FY23 trading ahead of expectations

The company saw strong trading in H123 and anticipates beating the board’s prior expectations for FY23. Boku expects to report H123 TPV of $5.0bn (+15% y-o-y), revenue of at least $37.5m (+24% y-o-y, +31% in constant currency) and EBITDA of least $12.0m (32% margin). LPMs were a key driver of growth, contributing revenue of $7.2m (19% of total revenue; up 359% y-o-y). With LPM monthly active users at 8% of the group total of 61.2m, this demonstrates how LPMs support higher transaction values. End-H123 cash was $114m, of which c $52m was Boku’s own cash, with an average daily cash balance of $106m in June. To reflect the stronger than expected performance we upgrade FY23/24/25 revenue by 6.4%/ 5.8%/5.4% and EBITDA by 7.7%/7.1%/5.9%.

CEO transition announced

The current CEO, Jon Prideaux, intends to retire from the role on 31 December 2023 and will remain as a non-executive director thereafter. After a search for a new CEO, Stuart Neal has re-joined Boku and been appointed CEO designate; he will work with Jon for the rest of the year. He is expected to join the board and be appointed CEO on 1 January 2024. Stuart held the role of Boku CFO in 2012-2014 and 2017–2019 before heading up the Identity division before its sale to Twilio.

Valuation: LPMs to drive upside

Boku is trading at a discount to its peer group on EV/EBITDA multiples for FY23. Via a reverse discounted cashflow (DCF) that uses our forecasts to FY25 (which are more conservative than the company’s mid-term targets would suggest), we estimate the share price is factoring in revenue growth of 6% and average EBITDA margins of 36% for FY26–32, well below the company’s targets. In a DCF factoring in meeting the targets by FY27, we estimate the shares could be worth 214p. A growing contribution from Amazon, continued adoption of LPMs and new major merchant sign-ups are the main triggers to achieve this, in our view.

H123 trading update

The table below summarises the company’s performance in H123.

Exhibit 1: H123 key performance indicators

H123

H122

Growth y-o-y

TPV

$5.0bn

$4.3bn

15%

Revenue

At least $37.5m

$30.3m

24%

Take rate

0.76%

0.70%

EBITDA

c $12m

$9.5m

25%

Monthly active users (MAU)

61.2m

46.4m

32%

New users

32.7m

29.3m

12%

Local Payment Methods (LPM):

MAUs

4.7m

2.1m

122%

New users

6.3m

3.2m

97%

LPM MAU/Total MAU

7.7%

4.5%

LPM new users/total new users

19.3%

10.9%

Revenue from LPMs ($m)

7.2

1.6

359%

Revenue from direct carrier billing ($m)

30.3

28.7

6%

LPM revenue/group revenue

19.2%

5.3%

Source: Boku

Changes to estimates

We have revised our forecasts to reflect H1 performance.

Exhibit 2: Changes to estimates

$'m

FY23e

FY23e

FY24e

FY24e

FY25e

FY25e

Old

New

Change

y-o-y

Old

New

Change

y-o-y

Old

New

Change

y-o-y

Revenue

72.1

76.8

6.4%

20.4%

82.1

86.9

5.8%

13.2%

92.1

97.0

5.4%

11.7%

Gross profit

69.6

74.1

6.4%

19.5%

79.2

83.9

5.8%

13.2%

88.9

93.6

5.4%

11.7%

Gross margin

96.5%

96.5%

0.0%

-0.7%

96.5%

96.5%

0.0%

0.0%

96.5%

96.5%

0.0%

0.0%

EBITDA

23.1

24.9

7.7%

21.6%

27.0

29.0

7.1%

16.4%

33.2

35.1

5.9%

21.4%

EBITDA margin

32.0%

32.4%

1.2%

0.3%

32.9%

33.3%

1.2%

0.9%

36.0%

36.2%

0.5%

2.9%

Normalised operating profit

17.8

19.5

10.0%

23.5%

21.5

23.4

8.9%

19.7%

27.0

28.9

7.3%

23.7%

Normalised operating margin

24.6%

25.4%

0.8%

0.6%

26.1%

26.9%

0.8%

1.5%

29.3%

29.8%

0.5%

2.9%

Reported operating profit

10.6

12.3

16.8%

172.0%

14.3

16.2

13.4%

31.2%

19.8

21.7

10.0%

34.3%

Reported operating margin

14.6%

16.1%

1.4%

9.0%

17.4%

18.6%

1.2%

2.6%

21.5%

22.4%

0.9%

3.8%

Normalised PBT

17.2

19.0

10.3%

23.9%

20.9

22.9

9.1%

20.2%

26.4

28.4

7.4%

24.3%

Reported PBT

10.0

11.8

17.7%

190.9%

13.8

15.7

13.9%

32.6%

19.2

21.2

10.2%

35.4%

Normalised net income

13.6

15.0

10.3%

22.3%

16.5

18.1

9.1%

20.2%

20.9

22.4

7.4%

24.3%

Reported net income

8.5

10.0

17.7%

-65.2%

11.7

13.3

13.9%

32.6%

16.4

18.0

10.2%

35.4%

Normalised basic EPS ($)

0.046

0.050

10.6%

22.6%

0.055

0.060

9.6%

19.7%

0.069

0.074

7.9%

23.0%

Normalised diluted EPS ($)

0.044

0.049

10.6%

22.6%

0.053

0.058

9.6%

19.7%

0.066

0.072

7.9%

23.1%

Reported basic EPS ($)

0.029

0.034

18.0%

-65.2%

0.039

0.045

14.4%

31.9%

0.054

0.060

10.7%

34.1%

Net debt/(cash)

(127.7)

(129.5)

1.4%

30.1%

(153.8)

(157.5)

2.4%

21.6%

(183.7)

(189.4)

3.1%

20.3%

TPV ($bn)

9.91

10.21

3.1%

15.2%

11.12

11.42

2.7%

11.8%

12.32

12.62

2.5%

10.5%

Take rate

0.73%

0.75%

0.02%

0.03%

0.74%

0.76%

0.02%

0.01%

0.75%

0.77%

0.02%

0.01%

Source: Edison Investment Research

Exhibit 3: Financial summary

$'m

2017

2018

2019

2020

2021

2022

2023e

2024e

2025e

31-December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

24.4

35.3

50.1

56.4

62.1

63.8

76.8

86.9

97.0

Cost of Sales

(2.3)

(2.5)

(5.6)

(4.9)

(1.6)

(1.8)

(2.7)

(3.0)

(3.4)

Gross Profit

22.1

32.8

44.6

51.5

60.5

62.0

74.1

83.9

93.6

EBITDA

 

 

(2.3)

6.3

10.7

15.3

22.9

20.5

24.9

29.0

35.1

Normalised operating profit

 

 

(4.0)

4.8

4.5

11.6

18.6

15.8

19.5

23.4

28.9

Amortisation of acquired intangibles

(1.3)

(1.3)

(1.6)

(2.2)

(1.9)

(1.0)

(1.2)

(1.2)

(1.2)

Exceptionals

(2.2)

(1.4)

(0.3)

(21.1)

0.4

(5.1)

0.0

0.0

0.0

Share-based payments

(1.5)

(4.6)

(6.8)

(4.9)

(6.4)

(5.2)

(6.0)

(6.0)

(6.0)

Reported operating profit

(9.0)

(2.4)

(4.1)

(16.7)

10.6

4.5

12.3

16.2

21.7

Net Interest

(2.4)

(0.6)

(0.4)

(0.6)

(0.7)

(0.5)

(0.5)

(0.5)

(0.5)

Joint ventures & associates (post tax)

0.0

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

0.0

Profit Before Tax (norm)

 

 

(6.4)

4.3

4.1

11.0

17.8

15.3

19.0

22.9

28.4

Profit Before Tax (reported)

 

 

(28.5)

(3.0)

(1.3)

(17.3)

9.9

4.1

11.8

15.7

21.2

Reported tax

(0.1)

(1.3)

1.7

(1.5)

1.9

0.2

(1.8)

(2.3)

(3.2)

Profit After Tax (norm)

(4.8)

3.4

3.2

8.8

14.3

12.3

15.0

18.1

22.4

Profit After Tax (reported)

(28.7)

(4.3)

0.4

(18.8)

11.8

4.3

10.0

13.3

18.0

Minority interests

0.0

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

0.0

Net income (normalised)

(4.8)

3.4

3.2

8.8

14.3

12.3

15.0

18.1

22.4

Net income (reported)

(28.7)

(4.3)

0.4

(18.8)

6.3

28.9

10.0

13.3

18.0

Basic ave. number of shares outstanding (m)

150.3

217.1

246.8

273.8

294.0

298.3

297.7

299.2

302.2

EPS - basic normalised ($)

 

 

(0.03)

0.02

0.01

0.03

0.05

0.04

0.05

0.06

0.07

EPS - diluted normalised ($)

 

 

(0.03)

0.02

0.01

0.03

0.05

0.04

0.05

0.06

0.07

EPS - basic reported ($)

 

 

(0.19)

(0.02)

0.00

(0.07)

0.02

0.10

0.03

0.04

0.06

Dividend ($)

0.00

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

2.7

20.4

13.2

11.7

Gross Margin (%)

90.7

92.9

88.9

91.3

97.5

97.2

96.5

96.5

96.5

EBITDA Margin (%)

(9.5)

17.9

21.3

27.1

36.9

32.1

32.4

33.3

36.2

Normalised Operating Margin

(16.5)

13.7

9.0

20.5

30.0

24.8

25.4

26.9

29.8

BALANCE SHEET

Fixed Assets

 

 

26.9

23.0

52.2

69.8

71.9

65.7

65.8

66.4

66.9

Intangible Assets

25.8

22.5

46.8

65.6

63.1

56.2

56.7

57.2

57.3

Tangible Assets

0.4

0.3

3.5

3.8

5.7

4.4

4.8

5.3

5.9

Investments & other

0.7

0.3

1.8

0.5

3.1

5.1

4.3

4.0

3.8

Current Assets

 

 

79.3

84.0

89.2

155.2

145.0

212.2

253.5

299.4

348.6

Stocks

0.0

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

90.1

107.1

125.0

142.2

Cash & cash equivalents

18.7

31.1

34.7

61.3

56.7

99.6

129.5

157.5

189.4

Other

1.4

1.3

0.9

1.4

5.8

22.6

17.0

17.0

17.0

Current Liabilities

 

 

(78.0)

(79.6)

(81.8)

(139.7)

(122.1)

(157.8)

(188.5)

(215.8)

(241.4)

Creditors

(75.5)

(77.4)

(78.0)

(136.8)

(119.6)

(156.3)

(187.0)

(214.3)

(239.9)

Tax and social security

0.0

0.0

0.0

0.0

0.0

(0.2)

(0.2)

(0.2)

(0.2)

Short term borrowings

(2.5)

(2.2)

(2.1)

(1.4)

(1.1)

0.0

0.0

0.0

0.0

Other

(0.0)

0.0

(1.7)

(1.4)

(1.3)

(1.3)

(1.3)

(1.3)

(1.3)

Long Term Liabilities

 

 

(0.2)

(0.8)

(2.6)

(13.6)

(12.3)

(8.7)

(8.7)

(8.7)

(8.7)

Long term borrowings

(0.0)

0.0

0.0

(10.8)

(6.7)

0.0

0.0

0.0

0.0

Other long term liabilities

(0.1)

(0.8)

(2.6)

(2.8)

(5.7)

(8.7)

(8.7)

(8.7)

(8.7)

Net Assets

 

 

28.0

26.6

57.0

71.8

82.4

111.4

122.1

141.4

165.5

Minority interests

0.0

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

111.4

122.1

141.4

165.5

CASH FLOW

Op Cash Flow before WC and tax

(2.3)

6.3

7.4

15.3

22.9

20.5

24.9

29.0

35.1

Working capital

1.0

7.2

3.0

20.1

(7.1)

27.9

13.7

9.3

8.4

Exceptional & other

(5.5)

0.2

(1.3)

(3.8)

(3.5)

1.6

0.0

0.0

0.0

Tax

0.0

(0.2)

(0.1)

(0.3)

(0.4)

(0.3)

(1.0)

(2.0)

(3.0)

Net operating cash flow

 

 

(6.8)

13.5

9.0

31.3

11.9

49.7

37.6

36.3

40.6

Capex

(0.3)

(0.3)

(2.1)

(3.4)

(5.8)

(5.3)

(5.7)

(6.1)

(6.4)

Acquisitions/disposals

0.0

(0.2)

(0.7)

(36.6)

0.0

26.5

5.6

0.0

0.0

Net interest

(0.9)

(0.6)

(0.4)

(1.0)

(0.6)

(0.2)

(0.5)

(0.5)

(0.5)

Equity financing

19.8

0.5

0.6

26.2

1.1

(1.4)

(5.4)

0.0

0.0

Dividends

0.0

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)

(12.7)

(1.7)

(1.7)

(1.7)

Net Cash Flow

10.6

13.1

4.857

13.8

0.5

56.6

29.9

28.0

31.9

Opening net debt/(cash)

 

 

9.9

(16.2)

(28.9)

(32.6)

(49.0)

(48.8)

(99.6)

(129.5)

(157.5)

FX

0.4

(0.5)

(1.1)

1.3

(0.6)

(5.6)

0.0

0.0

0.0

Other non-cash movements

15.1

(0.0)

(0.0)

1.2

(0.1)

(0.3)

0.0

0.0

0.0

Closing net debt/(cash)

 

 

(16.2)

(28.9)

(32.6)

(49.0)

(48.8)

(99.6)

(129.5)

(157.5)

(189.4)

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.

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.

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London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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Copyright: Copyright 2022 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.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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Templeton Emerging Markets Investment Trust (TEMIT) benefits from the extensive experience of co-managers Chetan Sehgal (lead manager) and Andrew Ness. The trust’s performance has turned a corner as its results tend to be better during periods when share prices are driven by company fundamentals, which are the driver of long-term equity returns, rather than macroeconomic factors. Emerging markets offer a broad range of investment opportunities and are home to a growing number of world-class, leading businesses. While all portfolio stocks are selected on a bottom-up basis, TEMIT’s high-conviction portfolio is widely diversified by geography, sector and market cap. Its balanced structure means the fund has potential to outperform in both up and down markets.

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