Bango – buying its competitor will prove to be a ‘game changer’
In just over three weeks Bango (LON:BGO) will be declaring its final results for the year to end December 2022.
Despite much higher sales its profit line will have shown itself somewhat decimated.
However, I believe that the current year will see a significant improvement in the group’s fortunes, especially after its last highly transformational year.
Amongst several other pieces of corporate news last year, was one announcement of a €4m deal for its long-standing competitor, it may seem small beer, but it has catapulted Bango into the really big league.
Last August the £190m capitalised payments platform group acquired the global payments business of the Japanese mobile operator NTT DOCOMO.
In one swipe that acquisition will have helped to push the enlarged grouping into a market leading position as an independent payments solution provider for the world’s largest merchants and operators.
The Group’s Business
Founded in 1999, employing just 130 people globally, the Cambridge-based group has developed unique purchase behaviour technology that enables millions more users to buy the products and services they want, using innovative methods of payment including carrier billing, digital wallets and subscription bundling.
It allows mobile phone and broadband users to make payments without the need to enter credit card details and lets them pay through their bills instead.
That payment data, such as the items or services purchased, to help to generate new sales.
Bango harnesses this purchase activity into valuable marketing segments, called Bango Audiences.
Merchants use these audiences to target their marketing at paying customers based on their purchase behaviour.
Better targeting increases spend through the Bango payments business, in turn generating more data insights, creating a powerful virtuous circle that drives continuous growth. Everyone connected to the Bango Platform thrives as the virtuous circle grows.
The world's largest online merchants, including Amazon, Google and Microsoft, use Bango technology to acquire more paying users.
Alternative payment methods, including carrier billing and mobile wallets, are the fastest growing of any payment method.
Some 80% of people own a smartphone globally while just around 20% of people have a credit card.
For merchants, alternative payments open access to millions more consumers worldwide.
Its global partnerships are boosted significantly, doubling the number of Google Play and Amazon routes.
The Docomo deal added new telco partners such as Deutsche Telecom, Telefónica, and América Móvil and extended Bango relationships with Softbank, Vodafone, Airtel India and Singtel.
It consolidated the group’s position as a leading payments platform for global merchants including Netflix, BritBox and YouTube.
It also added in new merchants including Shopify, Discovery, Tidal, Jetstar and Paramount+.
Last September the group tied up a partnership deal with Movistar Mexico, a mobile operator subsidiary of Telefonica, by which it will streamline mobile payments through direct carrier billing for its subscribers in Mexico.
In November it launched the first European e-distribution partnership for McAfee, the online protection services group.
In the middle of last month the group signed up a new Digital Vending Machine deal with Benefit One Inc, the leading Japanese employee benefits platform.
A week later it announced a new partnership agreement with Dropbox, the leading cloud storage service, through which it will be able to grow its global user base by offering its subscription product through a global network of telecom operators that have adopted the Bango Platform to deliver third-party offers.
At the time Jamie Young Perlman, VP of Business Development at Dropbox stated that:
"Over 700m users around the globe trust Dropbox when it comes to storing, sharing, and getting tasks done with their most important files. Our best-in-class security, privacy, reliability, and ease of use make Dropbox one of the most reliable technology brands that customers love to use.
As work has become more distributed, people need to access their content and accomplish tasks easily, from anywhere. This creates natural synergies with telecom operators who provide broadband and 5G services."
The day that deal was announced there was more than a quadrupling of the average daily dealing volume, lifting the shares up to 258p at one stage.
There are now 76.63m shares in issue.
The larger holders are NHN Corporation (13.7%), Liontrust Investment Partners (11.9%), Herald Investment Management (9.85%), Hargreaves Lansdown Asset Management (9.01%), Raymond Anderson, Chmn, (7.80%), HSBC Global Asset Management (HK) (6.64%), Odey Asset Management (6.46%), Cavendish Asset Management (4.65%), Anil Malhotra, CMO, (3.44%), and Barclays Bank (Private Banking) (2.26%).
Broker’s View – Price Objective 345p
Analysts Ciaran Donnelly and William Larwood at the group’s Broker Liberum Capital have a Buy rating out on the group’s shares, with a price objective of 345p.
At the end of January this year they upped some of their estimates.
After allowing for the various ramifications and costs of the Docomo acquisition, their estimates for the 2022-year profits of just $0.7m compared to $3.4m last year, on the back of $32.9m of revenues ($20.7m), with earnings collapsing from 7.0c to just 0.9c per share.
However, for the next year to end December the analysts estimate $50.3m revenues, $8.0m pre-tax profits and earnings of 9.7c per share.
Jumping forward to 2024 they see $60.4m sales, $24.5m profits, generating a very healthy 28.3c per share in earnings.
My View – a buy ahead of the results
I really like what I can see with this group.
Its Management has pulled off some canny deals in the last year or so, which will, undoubtedly, be fruitful in due course as they have all been bedded down and built upon.
At 248p the shares are fairly close to their 2017 High of 261p – that level could be broken through within the next month or so as investors begin to get to grips with the staggering potential that this group has before it over the next couple of years or so.
Could a deal with Apple be on the cards?
Hold very tightly.
(Profile 05.09.22 @ 198.5p set a Target Price of 250p*)
(Asterisks * denote that Target Prices have been achieved since Profile publication)