Since I last highlighted BANGO here back in September following a catch up call with management, there has been both positive news flow, along with a 20% up lift in the share price.
Having recently released an upbeat Trading Update to the market, closely followed by the most recent announcement that it had collaborated with TPAY MOBILE in order to boost digital access across fast-growing mobile-first markets, I have once more taken up an opportunity to speak with the company.
This time round it was with CEO Paul Larbey who sounded positively upbeat on the company’s roadmap and the prospects for continued growth and expansion.
With Liberum recently installed as Broker and having initiated extensive coverage with a target price of £2.60p, it was perhaps an ideal time to hear more about how things were going.
Having announced in the recent update that end user spend grew to £1.9b from £1.1b in 2019, I am keen to ask as to whether such phenomenal growth in numbers can continue.
Larbey says, “absolutely the trend will continue, where although going forward it may become a bit more lumpy, billions of end user spend is going to continue, as new routes join the existing and this will in turn continue to drive that growth”.
Expanding on the current picture, the CEO says, “deals signed in 2020 will come through in the next year and that pattern follows through into next year on that and beyond, so it will continue to increase, with data monetization and direct connections contribution providing added benefit”.
As many investors soon observed, the global pandemic provided for increased momentum for those operating in the digital space, and to that end I ask Larbey as to how this has played out for Bango.
Whilst Bango was already sitting in a positive spot, the recent and ongoing situation should have clearly benefitted the company and its prospects. “what it has actually done is to accelerate adoptions such as people buying games and video which has seen a whole host of new users starting to spend. We saw that back in March with new people buying such as with Netflix for example and they were still doing that by September and that is continuing”.
Increasingly, investors are waking up to the vast potential of Bango’s expanding and all embracing offerings and the routes to increased monetization which also includes the area of subscriptions.
These are now close to 40% of revenues where Liberum says Bango is currently managing around six million subscriptions averaging around $10 per subscription each month which includes amongst others Netflix, Amazon Prime, Britbox and Xbox.
Larbey says, “we are able to bundle connections together such as what we have done with Microsoft and Xbox which are driving subscriptions and that provides us with very nice recurring revenue that generates generally high value.
The length and value combined are good for us as we obviously take a percentage of the end user spend”.
Subscriptions aside, one of the most exciting aspects of the Bango model going forward is the Bango Marketplace-advertiser which is something investors have been keeping close tabs on.
This is effectively purchase behaviour targeting, that allows Bango to leverage the important data that the company holds which Larbey says provides them with a lens into what people are making purchases on. “If you go back say 20 years, Google started helping businesses by using the data on what people were searching for which enabled those businesses to target them, so what we are doing is much the same in that it can help with the likes of focused marketing campaigns.
At Bango we have the insights into the purchase history and we feel this is really, really powerful and although 2020 was the first full year for it and it started small, it is now growing at an incredible rate.
We started off with around 200 app providers, that has increased to 2,000 but there are more like 200,000 for us to concentrate on, so there is certainly a long run way ahead and hopefully that will become larger than the end user spend, that’s for sure”.
The area around streaming is also touched upon, not least as the company recently announced a tie up with DocuBay which offers customers global membership to its Video-On-Demand.
Larbey says that Bango is bringing streaming partners into its system and sees it as another area where the company can excel.
“If you go back some years people bought their TV subscription from just one company which then had the job of aggregating all the services. That situation has changed and now become very fragmented and will continue that way with more and more players emerging in countries all over the world. We are well placed to play the part of an aggregator and bring those together and our partnership with BT is an example of that”.
Although Bango is already a global player with an extensive footprint it nevertheless continues to look at new regions and partners, which just last week saw it announce a new relationship with TPAY MOBILE.
TPAY is behind a digital commerce and financial inclusion that is focused on the Middle East, Africa and Turkey where its tech is used by regional digital merchants and international brands such as Google and Larbey says that he sees the partnership as significant in what is a fast growing market.
At this point I have to remind the CEO of a comment Ray Anderson made on one of our catch up calls a few years back, when he said that Bango was really only scratching at the surface of what could be achieved.
Despite the obvious growth, Larbey feels the analogy remains apt, as he expects the impressive rate of growth to be ongoing.
“There has been an acceleration of both people and commerce and the Covid situation has certainly pushed that further forward, so it is very exciting and there is plenty to go for”.
Investors here have been treated to plenty of news flow over the last year and that trend looks set to continue as we move forward.
“Absolutely that trend will continue” says Larvey adding “we are working on a launching lots of new and exciting things which we will be announcing in the coming weeks and months. Some will be building on existing things such as with Microsoft along with new merchants and additional partners for Bango Market Place, so there is plenty going on”.
Although at present the Bango team are all working remotely Larbey hopes to get the whole team back together later in the year, but this won’t be at the Westbrooke centre located in Cambridge “We are growing so fast that we really need a larger property to expand, but it will still be somewhere in Cambridge, most likely something central”.
Bango’s full year results are due out in March and I will be catching up again for a more numbers focused write up along with comment on any deals that may be announced prior to that date.
For now, Liberum is forecasting full year 2020 revenues at £12.2m rising to £14.7m next year with EBITDA at £4.1m and £4.4m.
Pre-tax profits are penciled in at £1.4m and £1.5m with EPS at 2.6p and 3.7p. On the bare numbers Bango shares may not look cheap and no doubt will have its detractors. However, whilst in my view the near term forecasts look on the conservative side, it is the longer term that excites me and most likely other firm holders.
The potential for cash generation and profits to really ramp up as we move forward appears apparent and the potential is vast and Liberum’s 2022 estimated numbers provide for a glimpse of this.
2022 is only next year, given that we are already into the financial year 2021 and on this front the broker estimates revenue jumping to £18.5m with pre-tax profits rising to £3.4m and 5p EPS.
On that basis the shares are worth my holding, or adding should we see a retrace as it remains in a spot that looks destined for ongoing exponential growth.
Additionally, it is not beyond the realms of possibility that a would-be suitor could come calling, although I rather suspect that any tabled offer would be at a significant premium to the current valuation.