Boku — Upgrading on strong finish to FY23

Boku (AIM: BOKU)

Last close As at 18/06/2024

GBP1.86

0.00 (0.00%)

Market capitalisation

GBP558m

More on this equity

Research: TMT

Boku — Upgrading on strong finish to FY23

Boku expects to report FY23 revenue and adjusted EBITDA ahead of our and consensus forecasts, helped by strength from both the core direct carrier billing (DCB) business and rapid growth in adoption of local payment methods (LPM). The strong finish to FY23 highlights positive momentum going into FY24 and we have upgraded our forecasts, with adjusted EBITDA up 7.6% for FY23, 5.3% for FY24 and 4.8% for FY25.

Katherine Thompson

Written by

Katherine Thompson

Director

Boku_resized

TMT

Boku

Upgrading on strong finish to FY23

FY23 trading update

Software and comp services

23 January 2024

Price

157.5p

Market cap

£468m

$1.27/£1

Net cash ($m) at end FY23*

*Includes restricted cash

151.2

Shares in issue

297.1m

Free float

93.5%

Code

BOKU

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

14.1

16.2

5.0

Rel (local)

17.3

13.2

8.9

52-week high/low

159p

124p

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

FY23 results

March 2024

Analyst

Katherine Thompson

+44 (0)20 3077 5700

Boku is a research client of Edison Investment Research Limited

Boku expects to report FY23 revenue and adjusted EBITDA ahead of our and consensus forecasts, helped by strength from both the core direct carrier billing (DCB) business and rapid growth in adoption of local payment methods (LPM). The strong finish to FY23 highlights positive momentum going into FY24 and we have upgraded our forecasts, with adjusted EBITDA up 7.6% for FY23, 5.3% for FY24 and 4.8% for FY25.

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

42.4

21.6

12/22

63.8

20.5

4.0

0.0

50.4

24.2

12/23e

82.7

27.3

5.8

0.0

34.4

18.1

12/24e

95.0

31.7

6.9

0.0

29.1

15.6

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

FY23 revenue and EBITDA beat

Boku expects to report FY23 revenue of at least $82.7m, up 30% y-o-y or up 33% in constant currency (cc), with total payment volume (TPV) of $10.5bn up 19% y-o-y (23% cc) and the take rate increasing to 0.79% (FY22 0.72%). Adjusted EBITDA is expected to be at least $27.3m, ahead of our $25.4m forecast and consensus of $26.4m despite continued investment in the M1ST network, resulting in an EBITDA margin of 33% (+0.9pp y-o-y). After buying back shares worth $10m in FY23, gross/net cash at year-end was $151.2m, with daily average cash of $131.5m in December, up 33% y-o-y and 24% h-o-h. Boku estimates it had ‘own cash’ of c $69m at the end of the year, with the remainder cash in transit to merchants.

Growth across all parts of the business

While LPMs generated revenue of $16.9m (+153% y-o-y) as LPM monthly active users (MAU) grew 76% y-o-y to 6.7m, growth from DCB including bundling was also strong at 15% y-o-y (up from 7% growth in FY22). The growing proportion of LPM users is having a positive effect on the take rate, as LPMs attract a take rate above the group average, and LPM revenue made up 20% of group revenue, doubling from 10% in FY22.

Valuation: Growth targets not reflected

Boku is trading at a premium to its peer group on EV/EBITDA multiples for FY24, which we believe reflects downgrades to the growth outlook for certain peers. Via a reverse discounted cash flow (DCF) that uses our forecasts to FY25 (which are more conservative than the company’s mid-term targets would suggest) and a WACC of 9% (down 1% since we last wrote), we estimate the share price is factoring in revenue growth of 5.6% and average EBITDA margins of 35% 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 248p. 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.

FY23 trading update

The table below summarises the key performance metrics for FY23.

Exhibit 1: FY23 performance versus FY22

FY23

FY22

Growth y-o-y

Revenue ($m)

82.7

63.8

30%

Adjusted EBITDA ($m)

27.3

20.5

33%

TPV ($bn)

10.5

8.9

19%

Take rate

0.79%

0.72%

MAU (m)

67.4

52.3

29%

New users - m

66.1

56.7

17%

LPM:

MAUs (m)

6.7

3.8

76%

New users (m)

13.8

8.4

64%

LPM MAU/total MAU

9.9%

7.3%

LPM new users/total new users

20.9%

14.8%

Revenue from LPMs ($m)

16.9

6.7

153%

Revenue from DCB ($m)

65.8

57.1

15%

LPM revenue/group revenue

20%

10%

Source: Boku

Changes to forecasts

We have revised our forecasts to reflect slightly stronger TPV growth and a higher take rate in all three years. We have assumed a proportion of the revenue upside is reinvested, resulting in an upgrade to our adjusted EBITDA forecasts of 7.6% for FY23, 5.3% for FY24 and 4.8% for FY25. This results in normalised diluted EPS upgrades of 9.4% for FY23, 6.5% for FY24 and 5.9% for FY25.

Exhibit 2: Changes to forecasts

$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

79.3

82.7

4.3%

29.7%

90.7

95.0

4.7%

14.9%

102.3

105.0

2.6%

10.5%

Gross profit

76.5

79.8

4.3%

28.7%

87.6

91.7

4.7%

14.8%

98.7

101.3

2.6%

10.5%

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

25.4

27.3

7.6%

33.5%

30.1

31.7

5.3%

15.9%

35.2

36.9

4.8%

16.6%

EBITDA margin

32.0%

33.0%

3.2%

0.9%

33.1%

33.3%

0.6%

0.3%

34.4%

35.2%

2.1%

1.8%

Normalised operating profit

20.0

22.0

9.6%

38.9%

24.5

26.1

6.5%

18.7%

29.0

30.7

5.8%

17.6%

Normalised operating margin

25.3%

26.6%

1.3%

1.8%

27.0%

27.5%

0.5%

0.9%

28.3%

29.2%

0.9%

1.8%

Reported operating profit

8.9

10.8

21.7%

137.9%

16.9

18.5

9.4%

71.3%

21.4

23.1

7.9%

24.9%

Reported operating margin

11.2%

13.1%

1.9%

5.9%

18.6%

19.5%

0.8%

6.4%

20.9%

22.0%

1.1%

2.5%

Normalised PBT

20.8

22.7

9.3%

48.3%

25.4

27.0

6.3%

18.6%

29.9

31.6

5.7%

17.1%

Reported PBT

9.6

11.6

20.0%

184.8%

17.8

19.4

9.0%

67.6%

22.3

24.0

7.6%

23.7%

Normalised net income

16.4

18.0

9.3%

46.4%

20.1

21.3

6.3%

18.6%

23.6

24.9

5.7%

17.1%

Reported net income

7.9

9.6

20.7%

-67.0%

15.1

16.5

9.0%

72.6%

19.0

20.4

7.6%

23.7%

Normalised basic EPS ($)

0.055

0.060

9.4%

46.8%

0.067

0.071

6.5%

18.2%

0.078

0.083

5.9%

15.9%

Normalised diluted EPS ($)

0.053

0.058

9.4%

46.8%

0.065

0.069

6.5%

18.2%

0.075

0.080

5.9%

15.9%

Reported basic EPS ($)

0.027

0.032

20.8%

-66.9%

0.051

0.055

9.2%

71.9%

0.063

0.068

7.8%

22.5%

Net debt/(cash)

(127.4)

(130.9)

2.8%

31.5%

(159.8)

(166.8)

4.4%

27.5%

(195.2)

(202.3)

3.6%

21.2%

TPV ($bn)

10.42

10.51

0.9%

18.6%

11.74

11.88

1.2%

13.0%

12.98

13.00

0.2%

9.5%

Take rate

0.76%

0.79%

0.03%

0.07%

0.77%

0.80%

0.03%

0.01%

0.79%

0.81%

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

82.7

95.0

105.0

Cost of Sales

(2.3)

(2.5)

(5.6)

(4.9)

(1.6)

(1.8)

(2.9)

(3.3)

(3.7)

Gross Profit

22.1

32.8

44.6

51.5

60.5

62.0

79.8

91.7

101.3

EBITDA

 

 

(2.3)

6.3

10.7

15.3

22.9

20.5

27.3

31.7

36.9

Normalised operating profit

 

 

(4.0)

4.8

4.5

11.6

18.6

15.8

22.0

26.1

30.7

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)

(3.0)

0.0

0.0

Share-based payments

(1.5)

(4.6)

(6.8)

(4.9)

(6.4)

(5.2)

(7.0)

(6.4)

(6.4)

Reported operating profit

(9.0)

(2.4)

(4.1)

(16.7)

10.6

4.5

10.8

18.5

23.1

Net Interest

(2.4)

(0.6)

(0.4)

(0.6)

(0.7)

(0.5)

0.8

0.9

0.9

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

22.7

27.0

31.6

Profit Before Tax (reported)

 

 

(28.5)

(3.0)

(1.3)

(17.3)

9.9

4.1

11.6

19.4

24.0

Reported tax

(0.1)

(1.3)

1.7

(1.5)

1.9

0.2

(2.0)

(2.9)

(3.6)

Profit After Tax (norm)

(4.8)

3.4

3.2

8.8

14.3

12.3

18.0

21.3

24.9

Profit After Tax (reported)

(28.7)

(4.3)

0.4

(18.8)

11.8

4.3

9.6

16.5

20.4

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

18.0

21.3

24.9

Net income (reported)

(28.7)

(4.3)

0.4

(18.8)

6.3

28.9

9.6

16.5

20.4

Basic ave. number of shares outstanding (m)

150.3

217.1

246.8

273.8

294.0

298.3

297.4

298.6

301.6

EPS - basic normalised ($)

 

 

(0.03)

0.02

0.01

0.03

0.05

0.04

0.06

0.07

0.08

EPS - diluted normalised ($)

 

 

(0.03)

0.02

0.01

0.03

0.05

0.04

0.06

0.07

0.08

EPS - basic reported ($)

 

 

(0.19)

(0.02)

0.00

(0.07)

0.02

0.10

0.03

0.06

0.07

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

29.7

14.9

10.5

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

33.0

33.3

35.2

Normalised Operating Margin

(16.5)

13.7

9.0

20.5

30.0

24.8

26.6

27.5

29.2

BALANCE SHEET

Fixed Assets

 

 

26.9

23.0

52.2

69.8

71.9

78.6

79.7

79.8

79.8

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

18.0

18.2

17.3

16.7

Current Assets

 

 

79.3

84.0

89.2

155.2

145.0

212.4

266.7

329.3

381.9

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

118.7

145.3

162.5

Cash & cash equivalents

18.7

31.1

34.7

61.3

56.7

99.6

130.9

166.8

202.3

Other

1.4

1.3

0.9

1.4

5.8

22.8

17.2

17.2

17.2

Current Liabilities

 

 

(78.0)

(79.6)

(81.8)

(139.7)

(122.1)

(157.8)

(205.1)

(244.9)

(270.8)

Creditors

(75.5)

(77.4)

(78.0)

(136.8)

(119.6)

(156.3)

(203.6)

(243.4)

(269.3)

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)

(9.9)

(9.9)

(9.9)

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)

(9.9)

(9.9)

(9.9)

Net Assets

 

 

28.0

26.6

57.0

71.8

82.4

124.5

131.3

154.2

181.0

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

124.5

131.3

154.2

181.0

CASH FLOW

Op Cash Flow before WC and tax

(2.3)

6.3

7.4

15.3

22.9

20.5

27.3

31.7

36.9

Working capital

1.0

7.2

3.0

20.1

(7.1)

27.9

18.8

13.2

8.7

Exceptional & other

(5.5)

0.2

(1.3)

(3.8)

(3.5)

1.6

(3.0)

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

42.1

42.8

42.6

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)

0.8

0.9

0.9

Equity financing

19.8

0.5

0.6

26.2

1.1

(1.4)

(9.7)

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

31.3

36.0

35.4

Opening net debt/(cash)

 

 

9.9

(16.2)

(28.9)

(32.6)

(49.0)

(48.8)

(99.6)

(130.9)

(166.8)

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)

(130.9)

(166.8)

(202.3)

Source: Boku, Edison Investment Research

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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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AFT Pharmaceuticals — Another R&D asset in the bag

AFT Pharmaceuticals has announced the addition of another candidate, HY-091, to its R&D pipeline, for the management of vulvar lichen sclerosus (VLS), a skin condition with no curative treatments available. We note that HY-091 is one of the three R&D assets under diligence by AFT, with evaluation ongoing in another two. An active R&D pipeline is a key focus area for AFT, which will support management’s objective to expand its global footprint and achieve its long-term goal to have international markets represent 35% of sales (8% in FY23). HY-091 will be developed as a mucoadhesive film, an extended-release formulation of a known (albeit undisclosed) molecule, and will target alleviation of symptoms such as pain, itching and inflammation. The asset will be developed and commercialised in collaboration with Hyloris (existing partner for Maxigesic IV and HY-090) with similar collaboration terms for HY-090.

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