Boku Inc (LON: BOKU)  

Boku Inc is an FTSE AIM 100 index listed provider of mobile commerce and mobile identity solutions. Moreover, the Company’s technology platform is used in over 59 countries and linked with more than 200 mobile wallets and network operators worldwide. It facilitates simplifying daily mobile interactions between consumers and digital organizations.

(Source: Company Presentation)

Technological Initiatives

The Company had launched Direct Carrier Billing ('DCB') and eWallets with Google, Netflix, Apple, DAZN, Spotify, Epic Games, Amazon, Riot Games and Tinder during H1 FY21. Meanwhile, BOKU had also launched M1ST across DCB, Wallets and Real-Time Payments and reached 5.7 billion user accounts.

Growth Prospects

• Expansion of Payments Division: The Company has expanded the regulated payment activities and is currently authorized to process regulated payments in 49 countries in Europe and Asia.
• Increase in Monthly Active Users: BOKU had gained momentum by showing a 46% increase in the monthly active users to 29.7 million at the end of H1 FY21. Furthermore, 20.8 million new users made their first transaction.
• Launch of Identity Division in Germany: BOKU had launched Verify and Authenticate solutions in Germany, and both solutions got integrated with O2, Telekom Deutschland, and Vodafone. Furthermore, the Company will target 120 million German mobile subscribers related to securing digital account creation and transactions.
• Increase in Total Payments Volume: BOKU had shown a robust growth of around 29% in the Total Payment Volume from USD 3.10 billion for H1 FY20 to USD 4.00 billion during H1 FY21.

Key Risks

• Weak Liquidity: The Company’s current ratio of 1.17x remained lower than the industry median of 1.35x during H1 FY21, implying weak liquidity levels when compared with the industry.
• Wrong Strategic Choices: The failure of partner relationships could adversely impact the business in the near term.
• Rise in Interest Rates: The recent hawkish comments made by several central governments regarding a hike in the interest rates could make fundraising difficult for the Company.

Now, we will analyse the Key Fundamental Statistics & Shareholding Pattern of Boku Inc.

Vitruvian Partners LLP is the most significant shareholder as it holds nearly 21.61 million shares as of 30 September 2021. 

H1 FY21 Financial & Operational Highlights (for six months ended 30 June 2021, as of 07 September 2021)

(Source: Company result)

• Robust Increase in Revenue: The growth from both divisions, identity & payments, caused a strong revenue growth of around 38% to USD 34.2 million during H1 FY21.
• Strong Profitability: On the profitability front, the Company’s net profit before tax had increased from USD 0.09 million to USD 1.90 million during H1 FY21.
• Improvement in Cash Balance: BOKU had improved the cash balance from USD 36.20 million at the end of H1 FY20 to USD 48.60 million as of 30 June 2021.
  

Financial Ratios (H1 FY21)

Share Price Performance Analysis

(Source: Refinitiv, Research done by Kalkine Group)

On 22 October 2021, at 08:55 AM GMT+1, BOKU’s shares were trading at GBX 175.00, same as the previous day closing price. Stock’s 52-week High and Low were 212.50 and GBX 113.50, respectively.

From a technical perspective, the stock price is hovering around the lower Bollinger band, indicating an upside potential in the stock price. Moreover, the 14-days RSI of ~28.59 approaches oversold territory, which may cause an upside momentum in the stock price.

Over the last one year, BOKU’s stock price has delivered a positive return of ~54.19%, and it has outperformed the FTSE AIM 100 index (benchmark index) with a return of approximately 24.21%.

Valuation Methodology: Price/Earnings Approach (NTM) (Illustrative)

Business Outlook

The Company had delivered an outstanding H1 FY21 period with revenues and Adjusted EBITDA increasing in both the Payments and Identity divisions. In addition, BOKU had recently collaborated with Deutsche Telekom, O2 and Vodafone to bring German businesses and consumers better, safer online experiences. The Company would look forward to replicating the encouraging business performance of H1 FY21 in both the Payments and Identity businesses into the second half of the year as well.

The Identity business was initially more adversely impacted by Covid-19 than Payments with volumes from existing merchants reduced as their businesses slowed and direct sales & marketing events became difficult. Nonetheless, the Company had anticipated a strong recovery for the payments division in 2022. However, considering the rising inflation worldwide and increasing bond yields, the stock price may undergo adverse movements. Thus, it would depend on the risk appetite of the clients to take a reasonable position on this Company having strong fundamentals and a bright outlook.

Considering the solid revenue growth during H1 FY21, several key launches, improved cash balance, robust bottom-line business, and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on Boku Inc at the current price of GBX 175.00 (as on 22 October 2021 at 08:55 AM GMT+1), with lower-double digit upside potential based on 69.71x Price/NTM Earnings (approx.) on FY21E earnings per share (approx.). 

*The reference data in this report has been partly sourced from REFINITIV.

*All forecasted figures and Peer information have been taken from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

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