Boku — Upgrading FY20 EBITDA

Boku (AIM: BOKU)

Last close As at 04/11/2024

GBP1.80

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Market capitalisation

GBP542m

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Research: TMT

Boku — Upgrading FY20 EBITDA

Boku has released a trading update confirming that EBITDA is likely to be ahead of consensus expectations for FY20. As most of the upside is due to COVID-19-related cost savings, we have upgraded our FY20 EBITDA and EPS forecasts by 10% and 15%, respectively. We leave our FY21/22 forecasts unchanged, pending a more detailed trading update in January that will cover the busy December holiday season.

Katherine Thompson

Written by

Katherine Thompson

Director

TMT

Boku

Upgrading FY20 EBITDA

Trading update

Software & comp services

2 December 2020

Price

122.5p

Market cap

£352m

US$1.34:£1

Net cash ($m) at end H120

60.4

Shares in issue

287.3m

Free float

89%

Code

BOKU

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

1.7

32.4

45.8

Rel (local)

(10.4)

20.6

62.9

52-week high/low

123p

49p

Business description

Boku operates a billing and identity verification platform that connects merchants with mobile network operators in more than 50 countries. It has c 300 employees, with its main offices in the US, UK, Estonia, Germany and India.

Next events

FY20 trading update

January 2021

Analyst

Katherine Thompson

+44 (0)20 3077 5730

Boku is a research client of Edison Investment Research Limited

Boku has released a trading update confirming that EBITDA is likely to be ahead of consensus expectations for FY20. As most of the upside is due to COVID-19-related cost savings, we have upgraded our FY20 EBITDA and EPS forecasts by 10% and 15%, respectively. We leave our FY21/22 forecasts unchanged, pending a more detailed trading update in January that will cover the busy December holiday season.

Year
end

Revenue ($m)

EBITDA*
($m)

Diluted EPS*
($)

DPS
($)

P/E
(x)

EV/EBITDA
(x)

12/18

35.3

6.3

0.016

0.0

105.8

72.1

12/19

50.1

7.4**

0.012

0.0

136.5

61.6

12/20e

55.4

13.5

0.025

0.0

65.5

33.7

12/21e

66.4

17.7

0.032

0.0

52.1

25.8

12/22e

77.7

21.1

0.040

0.0

41.0

21.6

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

Cost savings boost FY20 EBITDA

Boku has announced that as a result of continued strong trading in the Payments business and the benefit of COVID-19-related cost savings, the board now expects group EBITDA of at least $13.5m for FY20, at least $1m higher than current consensus. It will provide a more detailed trading update in January that will cover the peak December trading period. This may also provide some evidence of the stickiness of customers signed up during recent lockdowns.

Upgrading FY20 forecasts

We have made a small upward revision to our FY20 revenue forecast (+0.5%) to reflect slightly stronger trading from the Payments business. We have reduced operating costs by c $0.9m and reflected a higher share count from the recent vesting of restricted stock units and the exercise of options by management. We raise our FY20 EBITDA forecast by 10% (from $12.3m to $13.5m) and our normalised diluted EPS by 15%. We make no changes to FY21/FY22 revenue or EBITDA forecasts at this point.

Valuation: Reflects lockdown boost to Payments

Having gained 35% since reporting H1 results in September, Boku is trading at a discount to the average of payment processor peers on an EV/sales and EV/EBITDA basis, and at a small premium to identity management peers on both multiples. Reflecting the different growth and profitability dynamics of the Payments and Identity businesses, we use a sum-of-the-parts approach to assign value to each separately, generating a group equity value of 127p per share (previously 124p per share). Excluding the Identity business entirely, Boku would be worth 120.5p per share. In addition to clarity over the longevity of new Payments customers who signed up during lockdowns, key catalysts for the share price include a return to revenue growth in the Boku Identity business, new major merchants being signed up and a growing contribution from wallets.

Exhibit 1: Financial summary

$'m

2014

2015

2016

2017

2018

2019

2020e

2021e

2022e

31-December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

18.3

19.2

17.2

24.4

35.3

50.1

55.4

66.4

77.7

Cost of Sales

(4.1)

(4.0)

(3.2)

(2.3)

(2.5)

(5.6)

(5.4)

(7.3)

(10.5)

Gross Profit

14.2

15.2

14.0

22.1

32.8

44.6

50.0

59.1

67.2

EBITDA

 

 

(9.6)

(11.4)

(12.3)

(2.3)

6.3

10.7

13.5

17.7

21.1

Normalised operating profit

 

 

(9.8)

(12.4)

(13.8)

(4.0)

4.8

4.5

10.0

13.5

16.8

Amortisation of acquired intangibles

(0.8)

(1.9)

(1.7)

(1.3)

(1.3)

(1.6)

(1.7)

(1.5)

(0.4)

Exceptionals

(2.1)

(0.1)

(2.4)

(2.2)

(1.4)

(0.3)

(0.8)

0.0

0.0

Share-based payments

(1.7)

(1.8)

(2.1)

(1.5)

(4.6)

(6.8)

(7.0)

(5.5)

(5.5)

Reported operating profit

(14.4)

(16.2)

(19.9)

(9.0)

(2.4)

(4.1)

0.5

6.6

10.9

Net Interest

(0.6)

(0.4)

(1.2)

(2.4)

(0.6)

(0.4)

(0.8)

(1.3)

(1.2)

Joint ventures & associates (post tax)

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Exceptionals

0.0

0.0

0.0

(17.1)

0.0

0.0

0.0

0.0

0.0

Profit Before Tax (norm)

 

 

(10.4)

(12.8)

(15.0)

(6.4)

4.3

4.1

9.2

12.3

15.6

Profit Before Tax (reported)

 

 

(15.0)

(16.6)

(21.1)

(28.5)

(3.0)

(1.3)

(0.3)

5.3

9.7

Reported tax

(0.4)

(0.4)

0.5

(0.1)

(1.3)

1.7

(0.0)

(0.5)

(1.5)

Profit After Tax (norm)

(7.8)

(9.6)

(11.2)

(4.8)

3.4

3.2

7.3

9.8

12.5

Profit After Tax (reported)

(15.4)

(17.0)

(20.6)

(28.7)

(4.3)

0.4

(0.3)

4.8

8.2

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

0.0

0.0

0.0

0.0

0.0

Net income (normalised)

(7.8)

(9.6)

(11.2)

(4.8)

3.4

3.2

7.3

9.8

12.5

Net income (reported)

(15.4)

(17.0)

(20.6)

(28.7)

(4.3)

0.4

(0.3)

4.8

8.2

Basic ave.number of shares outstanding (m)

21.3

27.4

140.1

150.3

217.1

246.8

269.9

287.6

287.6

EPS - basic normalised ($)

 

 

(0.36)

(0.35)

(0.08)

(0.03)

0.02

0.01

0.03

0.03

0.04

EPS - diluted normalised ($)

 

 

(0.36)

(0.35)

(0.08)

(0.03)

0.02

0.01

0.03

0.03

0.04

EPS - basic reported ($)

 

 

(0.72)

(0.62)

(0.15)

(0.19)

(0.02)

0.00

(0.00)

0.02

0.03

Dividend ($)

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Revenue growth (%)

#DIV/0!

4.7

(10.4)

42.0

44.5

42.2

10.5

19.8

16.9

Gross Margin (%)

77.6

79.1

81.4

90.7

92.9

88.9

90.3

89.1

86.5

EBITDA Margin (%)

(52.5)

(59.2)

(71.4)

(9.5)

17.9

21.3

24.4

26.6

27.2

Normalised Operating Margin

(53.2)

(64.4)

(80.0)

(16.5)

13.7

9.0

18.0

20.4

21.6

BALANCE SHEET

Fixed Assets

 

 

32.7

30.8

26.8

26.9

23.0

52.2

95.7

93.9

92.1

Intangible Assets

32.5

30.1

25.7

25.8

22.5

46.8

91.2

89.8

89.5

Tangible Assets

0.2

0.7

0.5

0.4

0.3

3.5

2.1

1.1

0.1

Investments & other

0.0

0.0

0.6

0.7

0.3

1.8

2.5

3.0

2.5

Current Assets

 

 

72.5

53.0

48.9

79.3

84.0

89.2

104.9

147.4

180.5

Stocks

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Debtors

59.7

43.3

37.1

59.1

51.7

53.6

65.8

92.6

106.9

Cash & cash equivalents

12.0

9.0

11.3

18.7

31.1

34.7

38.2

53.9

72.7

Other

0.7

0.6

0.5

1.4

1.3

0.9

0.9

0.9

0.9

Current Liabilities

 

 

(69.6)

(65.5)

(61.0)

(78.0)

(79.6)

(81.8)

(93.2)

(124.7)

(143.6)

Creditors

(64.6)

(60.4)

(54.9)

(75.5)

(77.4)

(78.0)

(87.9)

(120.9)

(139.6)

Tax and social security

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Short term borrowings

(5.0)

(5.1)

(6.1)

(2.5)

(2.2)

(2.1)

(3.3)

(3.3)

(3.3)

Other

0.0

0.0

0.0

(0.0)

0.0

(1.7)

(1.9)

(0.5)

(0.6)

Long Term Liabilities

 

 

0.0

(0.3)

(15.2)

(0.2)

(0.8)

(2.6)

(17.4)

(16.1)

(14.9)

Long term borrowings

0.0

(0.2)

(15.1)

(0.0)

0.0

0.0

(16.2)

(14.9)

(13.7)

Other long term liabilities

0.0

(0.1)

(0.1)

(0.1)

(0.8)

(2.6)

(1.2)

(1.2)

(1.2)

Net Assets

 

 

35.5

18.0

(0.4)

28.0

26.6

57.0

90.1

100.4

114.1

Minority interests

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Shareholders' equity

 

 

35.5

18.0

(0.4)

28.0

26.6

57.0

90.1

100.4

114.1

CASH FLOW

Op Cash Flow before WC and tax

(9.6)

(11.4)

(12.3)

(2.3)

6.3

7.4

13.5

17.7

21.1

Working capital

9.3

11.6

(3.4)

1.0

7.2

3.0

(2.4)

6.2

4.4

Exceptional & other

(1.6)

1.1

4.2

(5.5)

0.2

(1.3)

(1.1)

0.0

0.0

Tax

(0.0)

(0.0)

(0.0)

0.0

(0.2)

(0.1)

(0.7)

(1.0)

(1.0)

Net operating cash flow

 

 

(1.9)

1.3

(11.5)

(6.8)

13.5

9.0

9.4

22.9

24.5

Capex

(1.1)

(3.6)

(1.5)

(0.3)

(0.3)

(2.1)

(2.5)

(2.7)

(2.8)

Acquisitions/disposals

5.9

0.3

0.0

0.0

(0.2)

(0.7)

(43.0)

0.0

0.0

Net interest

(0.3)

(0.3)

(0.3)

(0.9)

(0.6)

(0.4)

(0.6)

(1.2)

(1.1)

Equity financing

0.2

0.1

0.1

19.8

0.5

0.6

24.8

0.0

0.0

Dividends

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Other

0.6

(0.0)

0.1

(1.1)

0.2

(1.5)

(1.9)

(2.1)

(0.6)

Net Cash Flow

3.3

(2.2)

(13.1)

10.6

13.1

4.857

(13.9)

17.0

20.0

Opening net debt/(cash)

 

 

(4.9)

(7.0)

(3.6)

9.9

(16.2)

(28.9)

(32.6)

(18.7)

(35.7)

FX

(1.2)

(0.8)

(0.4)

0.4

(0.5)

(1.1)

0.0

0.0

0.0

Other non-cash movements

0.0

(0.4)

(0.0)

15.1

(0.0)

(0.0)

0.0

0.0

0.0

Closing net debt/(cash)

 

 

(7.0)

(3.6)

9.9

(16.2)

(28.9)

(32.6)

(18.7)

(35.7)

(55.7)

Source: Boku, Edison Investment Research

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This report has been commissioned by Boku and prepared and issued by Edison, in consideration of a fee payable by Boku. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

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This report has been commissioned by Boku and prepared and issued by Edison, in consideration of a fee payable by Boku. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

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Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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Kazia presented the results from a new interim data analysis of its ongoing Phase IIa study of paxalisib in glioblastoma multiforme (GBM). The data were consistent with previous data and showed progression-free survival (PFS) of 8.4 months and overall survival (OS) of 17.5 months. Importantly, Kazia also published some of the first safety data at the full 60mg dose, which show an attractive profile compared to other members of this class.

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