- Annual revenue up 31 per cent to $20.7mn
- Net profit from core Bango business up 48 per cent to $2.5mn
- End user spend up 74 per cent to $4.1bn
Aim-traded Bango (BGO:180p), 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, continues to scale up its business through multiple channels.
Last year, the group entered a new partnership with T-Pay Mobile (combined over 1bn users) to enable merchants connected to Bango’s platform to access new operators and wallet billing connections across Asia, the Middle East and Africa. One connection between Bango and TPay now provides access to 76 operators and wallets in no fewer than 24 countries. Partnerships with NTT Data in southeast Asia, Kakao Pay in South Korea, and carrier billing integrator Infomedia are expanding the footprint of merchants, too, and Bango’s earnings.
The group is incredibly well placed to benefit from the end of app stores’ monopoly of in app payments which has been triggered by regulatory changes in South Korea. Many of the leading app developers are already customers – from the streaming apps that use the Bango platform to the thousands of app developers using Bango Audience's purchase behaviour targeting. This part of the business combines payment data from Bango connections and third-party data sources (such as credit card processors) to create bespoke user groups that app developers target with their marketing campaigns.
As a result, Bango already has strong relationships with the apps that will be the first to breakout and engage directly with their customers. Moreover, the removal of app ID tracking by Apple has meant that more app developers are using Bango Audiences, too. The number of app developers engaged with Bango Audiences doubled to almost 10,000 in the second half of 2021.
To capitalise on this growth trend, Bango Audiences now takes a slice of the marketing campaign spend, rather than a fixed fee. Bango’s partnership with TikTok is also enabling the group to take a greater share of the app developers’ marketing budgets. Furthermore, increasing numbers of app developers are looking to monetise their apps directly to users outside app stores, while also engaging with these customers, another factor driving demand for the commercial models and payment methods offered by the Bango platform. The new partnership with Digital Turbine (US:APPS), a leading independent mobile growth and monetisation platform, adds a network of 50,000 app developers who can benefit from Bango Audiences.
In view of the multiple growth drivers at play, it’s sensible for Bango to scale up its business to tap into the growth, hence why administration costs rose by $5.2mn in 2021 and are expected to rise by $3.5mn in 2022. However, even allowing for the increased cost base, house broker Liberum Capital expects adjusted pre-tax profit (before amortisation of intangible assets) to grow 50 per cent to $5.1mn on revenue of $26.1mn in 2022.
The operationally leverage of the business model combined with a gross profit margin of 94 per cent means that a forecast 31 per cent rise in revenue to $34.4mn in 2023 could deliver 61 per cent higher pre-tax profit of $8.2mn, rising to pre-tax profit of $14.3mn on revenue of $44.7mn the year after. Net cash of $9.5mn is expected to almost double by 2024, buoyed by strong operational cash flow.
Bango’s share price has doubled since I initiated coverage ('Bang on the money', 26 September 2016), and did rally from 215p to 236p after I covered the half-year results (‘Priced for a highly profitable outcome’, 7 September 2021), but has since pulled back during the tech sector rout. Rated on an enterprise valuation to operating profit multiples of 20 (2022) and 11 (2024), Bango’s growth prospects are being materially underrated. I maintain fair value at 260p. Buy.
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