The Covid-19 pandemic has created as many opportunities as it has challenges for businesses. For example, national lockdowns have accelerated the move online to such an extent that companies that fail to adapt have found their business models not only outdated, but in many cases completely incompatible with the structural change in consumer behaviour. This is not only apparent in the booming online retail space, but in the way other services are being delivered and paid for.
Indeed, millions of people now use their mobile phone accounts to pay for subscriptions to Netflix, Amazon Prime, BritBox, Xbox, and other media offerings. The providers of these streaming content services are leveraging their footprint in a smart way, too, having seen the benefits of using mobile payment platforms to capture a greater share of consumer spend for their services, and create a high value recurring revenue stream.
This is one reason why mobile payment platform Bango has delivered 50 per cent higher annual cash profit than analysts had expected a few months ago. In January, new users were 50 per cent higher than at the peak of last year’s lockdown, a statistic that highlights the stellar pace of growth and one that still offers an investment opportunity to exploit.
Bango beats guidance, again
- Cash profit beats upgraded guidance by 12.5 per cent.
- Bango now manages 6m subscriptions across popular media offerings.
Aim-traded Bango (BGO:206p), a provider of a state-of-the-art mobile payment platform enabling smartphone users to charge purchases made in app stores straight to their mobile phone account, has announced another earnings beat. Annual cash profit of £4.6m was up 16-fold year on year, and 12.5 per cent ahead of new house broker Liberum Capital’s forecast.
Moreover, the payments platform is processing 50 per cent more subscriptions than 12 months ago. Analysts at Liberum estimate that 40 per cent of Bango’s revenue of £12.2m in 2020 came from subscriptions. Bango manages around 6m subscriptions across Netflix, Amazon Prime, BritBox, Pandora, Xbox and other popular media and gaming offerings. Liberum also notes that average revenue per subscription (around US$10 per month) is rising on the back of high-value content.
This highlights how Bango is capitalising on the accelerated move by consumers to online streaming services, which in turn is making its platform even more compelling to online merchants. Existing merchants are reaping the benefits, too, a good example being the launch of Amazon’s Prime Video Mobile with Airtel in India.
Bango is capitalising on the value of its data set, too. The number of app developers using its data monetisation platform Bango Marketplace increased by 10-fold to 2,000 year on year. The use of smart data analytics to segment Bango’s audience groups improves the return on marketing investment for app developers, hence the strong demand. Bango has recently launched a portal service, www.bango.ai, to increase the scale, functionality and scalability of the platform.
Liberum is pencilling in flat cash profit on revenue of £14.7m in 2021, but this looks an easy beat given the momentum in the business. For example, Bango has recently announced a strategic partnership with digital payments platform TPAYMobile to expand its geographic footprint, thus offering its merchants access to 610m users in the Middle East, Africa and Turkey.
The shares achieved my 225p target price after my last update (‘Technology stocks for the new normal’, 18 January 2021), and are currently showing a 122 per cent gain since I initiated coverage ('Bang on the money', 26 September 2016). However, with the £154m market capitalisation company generating healthy free cash flow – Liberum pencils in £4m in 2021, rising to £5.3m in 2022 – and priced on a deep 63 per cent ratings discount to peers on an enterprise valuation to operating profit basis, the re-rating has further to run. I raise my target price to 250p. Buy.
■ Simon Thompson's latest book Successful Stock Picking Strategies and his previous book Stock Picking for Profit can be purchased online at www.ypdbooks.com, or by telephoning YPDBooks on 01904 431 213 to place an order. The books are being sold through no other source and are priced at £16.95 each plus postage and packaging of £3.25 [UK].
Promotion: Subject to stock availability, both books can be purchased for the promotional price of £25 with free postage and packaging.
They include case studies of Simon Thompson’s market beating Bargain Share Portfolio companies outlining the investment characteristics that made them successful investments. Simon also highlights many other investment approaches and stock screens he uses to identify small-cap companies with investment potential. Details of the content can be viewed on www.ypdbooks.com.