Over the past 20 years or so mobile phones have become a near-necessity of modern life. Their uses transcend voice and text communications, with a fast-growing addition being online payments – a process facilitated increasingly by so-called 'direct carrier billing', which lets consumers charge purchases made on their smartphones to their mobile bills. This easy way of spending money is growing especially fast - Ovum, an IT consultant, expects its global transactional value to reach $25.3bn (£19.1bn) by 2020, from $16.6bn in 2015.
Entry point to burgeoning mobile payments market
Stable cost base
High-profile partnership with Amazon
Profits coming into sight
Relatively small player in big market
Currently still lossmaking
This upwards trajectory is good news for mobile payments specialist Bango (BGO). The company enables direct billing for purchases made in app stores – including those operated by Amazon (US:AMZN), Google (US:GOOG), Samsung and Microsoft (US:MSFT).
Bango generates revenue from each transaction processed on its platform, and results for the six months to 30 June revealed impressive progress. The value of transactions processed - in the trade, 'end-user spend' - doubled to £92m and that fed through to revenues for Bango - effectively gross profit - of £1.7m (£0.8m). Analysts at broker Cenkos expect end-user spend to increase dramatically from £132m in 2016 to £282m in 2017 and £593m in 2018.
Despite escalating demand, the company kept operating costs stable at £2.7m in the first half (against £2.5m in the previous first half). With a solid net cash position of £5.6m, Bango's bosses reckon the company should fund itself through to operating profitability by the end of 2017 and Cenkos forecasts profits in 2018 at both pre-tax and cash-flow level.
Strategic partnerships are the key to Bango's expansion. Management says its deal with Amazon Japan in June is “unprecedented” in scale. It allows payment via direct-carrier billing for goods in Amazon’s third-largest market, and reaches over 75 per cent of Japanese users of Android and iPhones via the NTT Docomo and KDDI networks, and the relationship with Amazon could extend to more countries; meanwhile it gives Bango credibility with other retailers who want to expand in Japan.
Meanwhile, Bango has just announced its expansion into South Korea to "support the growth ambitions of key partners" in terms of payments for digital, physical and 'internet of things' services.
On top of this, new routes for direct-carrier billing have been launched in countries ranging from Indonesia to Italy to the UK, as well as in the US via Verizon, the largest mobile network operator to go live with the Windows Store. And, in the first half, two existing Google Play billing routes switched to the Bango platform, in Kuwait and in Bahrain. The Bango Boost v2 service, providing consumer intelligence to app developers, should also help to attract and keep customers.
| BANGO (BGO) | ||||
| ORD PRICE: | 233p | MARKET VALUE: | £154m | |
| TOUCH: | 225-233p | 12-MONTH HIGH: | 279p | LOW: 67p |
| FORWARD DIVIDEND YIELD: | nil | FORWARD PE RATIO: | 111 | |
| NET ASSET VALUE: | 17.2p* | NET CASH: | £5.6m | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2014 | 5.1 | -5.4 | -11.0 | nil |
| 2015 | 1.3 | -5.0 | -9.0 | nil |
| 2016 | 2.6 | -4.7 | -6.8 | nil |
| 2017† | 4.6 | -2.4 | -3.2 | nil |
| 2018† | 8.5 | 1.3 | 2.1 | nil |
| % change | +85 | - | - | nil |
| NMS: | 3,000 | |||
| Market makers: | 6 | |||
| BETA: | 0.3 | |||
| *Includes intangible assets of £6.2m, or 9.4p per share † Cenkos forecasts | ||||
