Boku Inc (LON: BOKU)

Boku Inc is an FTSE AIM 100 index listed providers 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.

On 01 June 2022, BOKU will held its Annual General Meeting.

Growth Prospects

• Extension of Payments Network: On 12 April 2022, the Group announced the extension of its M1ST Payments Network with Real-Time Payments in Thailand. Real-time payments have witnessed significant growth in Thailand and is forecasted to reach 47.3 billion transactions valued at USD 2.7 trillion per year by 2025.
• Launch for Netflix in Japan: The Company has recently announced that its M1ST platform has launched PayPay mobile wallet payments for Netflix in Japan. This enables over 45 million users to pay for streaming subscriptions within Netflix.
• Disposal Activities: 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.

Key Risks 

• Record UK Inflation: The rise in regulated household energy bills led to UK inflation leaping to 9% in April 2022, the highest level since 1982. It may adversely impact UK equities.
• Weak Liquidity: The Company’s current ratio of 1.19x remained lower than the industry median of 1.43x during 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.
• Bank of England Warning: The Bank of England had trimmed its economic growth forecast for 2023 and is expected to show a contraction of 0.25% from a previously estimated growth of 1.25%. Moreover, it had also warned of UK inflation reaching around 10% very soon.

Key Fundamental and Shareholders Statistics of Boku Inc

Canaccord Genuity Wealth Management is the most significant shareholder as it holds nearly 26.27 million shares.

Financial Highlights (for year ended 31 December 2021, as of 29 March 2022)

(Source: Company Website)

• Turnaround in Bottomline: The Group delivered a turnaround in performance in FY21, with net profit before tax at USD 4.4 million, compared to a loss of USD 17.3 million in FY20.
• Cash Balances: It ended the period with a cash position of USD 62.4 million as of 31 December 2021, up from USD 48.6 million as of 30 June 2021. 

Share Price Performance Analysis

(Source: Refinitiv, Research done by Kalkine Group)

On 26 May 2022, BOKU’s shares were closed at GBX 109.00, the same as the previous day closing price. Stock 52-week High and Low were GBX 212.50 and GBX 107.00, respectively.

On a daily chart, the stock price is sustained between the lower Bollinger band and the middle Bollinger band. Hence, there could be an uptick in the stock price in the near term. Also, the 14-days RSI of ~34.98 approaches an oversold territory.

Valuation Methodology: Price/Earnings Approach (FY22E) (Illustrative) 

Business Outlook

The Company had delivered outstanding business performance in FY21, with revenues and adjusted EBITDA increasing across both divisions. Furthermore, the divestment of Identity division will provide additional funds to focus on accelerated growth of the Payments division and repay outstanding debt. Meanwhile, BOKU had broadened its M1ST network during FY21 through a significant growth in existing merchants and recruiting new merchants by penetrating new geographies. Overall, the Company remained confident regarding its business performance in 2022 with increased focus on the Payments division.

Please note markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

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 closing market price of GBX 109.00 (as of 26 May 2022), with lower-double digit upside potential based on 36.58x Price/NTM Earnings (approx.) on FY22E earnings per share (approx.). The stock has not started trading as of 27 May 2022 at 09:57 AM GMT+1.

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

Note 2: Investment decisions should be made depending on the investors’ appetite for 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 is subject to the factors discussed above.

Note 3: Target Price refers to a price level that 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.

Note 4:  Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice. 

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 the 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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