Bango – Super Bundling Losses To Profits This Year

The South Korean information technology group NHN Corporation obviously has faith in Paul Larbey’s Bango (LON:BGO) the Cambridge-based mobile commerce company.

In June NHN made available a three-year 6% pa loan to Bango of some $8m, it also received 314,380 five-year warrants to buy Bango shares at 202p each.

That arrangement was part of last August’s pivotal deal when Bango acquired the global payments business of NTT DOCOMO.

As a consequence, the £514m capitalised NHN Corporation is now Bango’s largest shareholder with nearly 10.5m shares, representing some 13.62% of its equity.

Last Thursday morning saw the £153m capitalised group announce a Trading Update for its first half to end June, showing revenues up 88% to $20.3m ($10.8m).

The world’s largest online merchants, including Amazon, Google and Microsoft, use Bango technology to acquire more paying users. 

Bango 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.

The group harnesses this purchase activity into valuable marketing segments, called Bango Audiences, enabling merchants to use those 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. 

Super Bundling is changing the way subscription services are found, managed and paid for, it offers the ability to bundle not just one or two subscription services together but 10s and 10s of services together.

Bango is enabling this functionality for consumer service providers, like telcos, and merchants all over the world through its Digital Vending Machine technology.

The big growth is coming from the Bango DVM side, which following recent contract wins now enables digital subscription services for 3 of the Top 5 US Telco operators, serving 61% of US customers.

Management Comment

CEO Paul Larbey stated that:

“Bango made great progress in the first half of the year with 88% revenue growth, demonstrating the momentum in the business.

Traction of the Digital Vending Machine is clear, particularly in the US market, with a further 2 key US wins.

Fast DVM growth means recurring, multi-year SaaS revenue is becoming an increasing proportion of the Bango revenue mix.

The high-profile launch of Verizon +Play in March sets a clear standard for super bundling globally and I am excited by the deals we have in the pipeline”.

Brokers’ Views – Consensus Target Price Is 327.5p

A consensus across three analysts following the company estimate that current year revenues to end December will rise from $31.43m to $49.10m, turning the group around from adjusted pre-tax losses of $0.43m to a $5.85m profit, lifting earnings up from a 0.56c loss to 7.71c a share.

For the coming year they estimate $57.10m revenues could see $18.20m profits, worth 24.13c per share in earnings.

The highest Target Price is made by Liberum Capital at 340p, while the lowest is 314p.

My View – Very Capable Of Breaking The Previous Peak

With such a strong hold in its marketplace and its massive potential, the Broker’s estimates for the group strongly suggest that its shares are ready to run very much higher than the current 200p.

I see an early break upwards to pass the 269p that was peaked in early March this year.

(Profile 05.09.22 @ 198.5p set a Target Price of 250p*)

(Asterisk * denotes that the Target Price has been achieved since Profile publication)