Boku Inc

Boku Inc (LON: BOKU) is an FTSE AIM 100 listed company and is engaged in mobile commerce and mobile identity solutions.

Investment Rationale for Valuation – Speculative Buy at GBX 131.50

• 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 US$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.
• Robust Results: In FY21, revenues grew by over 23% to US$69.2 million, compared to FY20.
• Technical Indicator: The 20-day moving average of the stock has stabilised after a recent downtrend and looks poised for a reversal in the near term.  

Key Risks

• Financial Risks: The Group is exposed to financial risks such as market risk, credit risk and liquidity risk.  
• Technology Risk: Being a technology enabled firm, it is prone to changes in technological trends and preferences.  

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 US$4.4 million, compared to a loss of US$17.3 million in FY20.
• Cash Balances: It ended the period with a cash position of US$62.4 million as of 31 December 2021, up from US$48.6 million as of 30 June 2021.  

One Year Share Price Chart

(Source: REFINITIV; Analysis done by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY22E)

Conclusion

The management opines that going forward the company will evolve into a pureplay payments company, with a leading position in Direct Carrier Billing and rapid growth in other local payment methods, such as eWallets and Real-Time Payments.

The stock made a 52-week high and low of GBX 212.50 and GBX 109.55, respectively.

Based on the decent fundamentals, launch & extension of payment networks, turnaround in bottom line, 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 131.50 (as of 19 April 2022) with lower double-digit upside potential based on 47.93x Price/NTM Earnings (approx.) on FY22E earnings per share (approx.).

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.

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: Dividend Yield may vary as per the stock price movement.

Note 4: 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.

Note 5: ‘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 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 unfavorable movement in the stock prices.

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