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.

The Company will release audited full-year FY21 results in March 2022. 

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.
• 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 FY21. Meanwhile, BOKU had launched Verify and Authenticate solutions in Germany, with both solutions integrated with O2, Telekom Deutschland, and Vodafone. Meanwhile, BOKU had also launched M1ST (“Mobile-First”) across DCB, Wallets and Real-Time Payments and reached to 5.7 billion user accounts.
• Divestment of Identity Division: On 19 January 2022, the Company has announced the sale of Identity Division to Twilio Inc. for a cash value of USD 32.3 million, to focus on mobile first network payment (M1ST), e-wallet and real time payments. Boku will invest part of the proceeds in M1ST, repay debt and balance for working capital purposes.
• Significant Operational Progress: The TPV (“Total Processed Value “) of the Company has increased by 18% to USD 8.2 billion during the year FY21 from USD 6.9 billion in the year FY20.

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.
• Record Inflation: British Consumer Price inflation surged to 5.4% in December 2021, putting pressure on the Bank of England to raise interest rates again.

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 31 December 2021. 

FY21 Trading Update (for the twelve months ended 31 December 2021, as of 19 January 2022)

• Incremental Group Revenue: The group’s revenue for the year 2021 is expected to be around USD 69.0 million, estimating an increase of about 22% from USD 56.4 million in 2020.
• Estimated EBITDA: The Adjusted EBITDA of the Company is estimated to be around USD 22.9 million, showing an upside of 21% from USD 19.0 million in the year 2020.
• Strong Cash Position: The Company is sitting on high cash of USD 62.4 million as on 31 December 2021 as compared to USD 48.6 million as on 30 June 2021.
  

Financial Ratios (H1 FY21)

Share Price Performance Analysis

(Source: Refinitiv, Research done by Kalkine Group)

On 21 January 2022, at 09:47 AM GMT, BOKU’s shares were trading at GBX 164.32, down by around 0.42% from the previous day closing price. Stock 52-week High and Low were 212.50 and GBX 138.00, respectively.

From a technical perspective, the stock price is hovering between the lower Bollinger band and the middle Bollinger band, indicating an upside potential in the stock price. The 14-days RSI of ~36.55 reflects a bullish price momentum.

Over the last one year, BOKU’s stock price has delivered a positive return of ~17.86%, and it has outperformed the FTSE All-Share Software & Computer Services index (benchmark sector) with a return of about 11.02% and FTSE AIM 100 index (benchmark index) with a return of negative 7.38%. 

Valuation Methodology: Price/Earnings Approach (FY22) (Illustrative)

Business Outlook

The Company had delivered an outstanding business performance in FY21, with revenues and adjusted EBITDA increasing across both divisions. In addition, BOKU had recently collaborated with Deutsche Telekom, O2 and Vodafone to bring German businesses and consumers better, safer online experiences. Meanwhile, the divestment of the Identity division will provide additional funds to focus on the accelerated growth of the Payments division and repay outstanding debt. Boku has expanded the payments reach and shown a five-fold increase in the volumes of e-wallets and real-time payments during FY21. Overall, the Company aimed to generate long term returns for the shareholders with an increased focus on the Payments division.

Considering the significant operational progress, increased focus on Payments division, decent FY21 financial performance, strong strategic collaborations, 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 164.32 (as on 21 January 2022 at 09:47 AM GMT), with lower-double digit upside potential based on 48.03x Price/NTM Earnings (approx.) on FY22E earnings per share (approx.).

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Note 3: Target Price refers to a price level which the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios. 

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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