MIDAS SHARE TIPS UPDATE: Hold on to our tip Boku that tripled in a year
Midas tipped Boku at 59p right at the start of the first lockdown, when stay-at-home consumers across the world watched, played and paid for everything via mobile phones.
The online payment business had risen to £1.74 a share a year later in March 2021, when readers were advised to bank some profits.
Last week, Boku showed that it still has a winning formula when it comes to payment technology. It announced first half results showing local payment methods now make up a fifth of turnover.
Local payment methods are – as the name suggests – transactions only used in certain parts of the world. They are increasingly popular with an emerging global middle class who are bypassing traditional credit card brands to go straight to either country-specific e-wallet payments, or buy-now, pay-later methods, or paying by text message.
Thanks to Boku, customers using these methods can pay for subscriptions with Spotify, PlayStation and Netflix on their phones.
Ease: Boku enables phone payments and the company’s debt-free status gives it headroom to invest
By doing more business with these ‘mega merchants’ Boku can keep growing sales without needing to take on new customers, according to stockbroker Peel Hunt. So, as long as payment methods across the world remain splintered, Boku will thrive.
Profits after tax were down, due to the company’s sale of a division landing it with a one-off profit last year. But adjusted earnings before interest, tax, depreciation and amortisation (a key measure of core profitability) were up 28 per cent. Using this measure and the firm’s enterprise value, Peel Hunt reckons Boku is trading at a 25 per cent discount to its peers. The company has no debt.
Change is on the horizon for Boku, with well-respected chief executive Jon Prideaux moving to a non-executive position. The new boss, Stuart Neal, is Boku’s former chief commercial officer and one-time commercial director of Barclaycard. He has plenty of knowledge of the company and the sector.
Boku’s share price performance over the past 12 months has been impressive – up 41 per cent since September 2022, even if they are still below the highs they reached in March 2021 when we advised some profit taking.
Midas verdict: The meteoric rise in local payment methods as a revenue raiser for Boku shows this firm is light on its feet and able to take advantage of trends. The decline of cash isn’t about to slow down any time soon, and Boku’s work with big businesses from Netflix to Amazon gives it plenty of space to grow.
Analysts have upgraded their forecasts after Boku’s results, and the company’s debt-free status gives it headroom to invest. On most metrics, the shares look a good bet.
It is undeniable that, having had a very good run after Midas first tipped them in 2020, they have fallen back from their 2021 heights. However, at £1.46 they are worth holding on to for the next chapter of the Boku story.
Traded on: AIM Ticker: BOKU Contact: boku.com or via IFC advisory on 020 3934 6630