Supercharged growth and the prospect of it continuing for the foreseeable future have fired the value of mobile payments platform operator Bango upward.
Results for 2017 revealed the company’s key metric, end-user spend (EUS), more than doubled during the course of the year to £271million.
This growth in user spend – which was running at an annualised rate of £465m at the end of February – relative to the increase in operating expenditure is the crux of the Bango investment case.
Solid platform: Supercharged growth and the prospect of it continuing for the foreseeable future have fired the value of mobile payments platform operator Bango upward
While end-user spend was doubling, operational costs were down slightly at £2.3m from £2.4m the year before, demonstrating the high scalability of the platform.
Revenues grew 62 per cent to £4.2m from £2.6m, a shade ahead of the consensus forecast of £4.1m.
Ian McInally, an analyst at broker Cenkos, had previously estimated gross EUS would rise to £259m for 2017 and to £498m by 2018, at which point, he predicts the group would be generating £8.2m of gross profit with positive earnings of £3m for the year.
That is a punchy valuation by conventional measures with a market value of £113m at 171p, but the hope is that Bango eventually proves to be anything but the norm.
According to the company, the scalability of the platform means it can comfortably handle at least a doubling of end-user spending at current stable cost levels.
Furthermore, the platform was tested to a capacity of more than £5billion worth of transactions a year in mid-2017 and not found wanting.
True, 2017 saw an underlying loss of £1.6m (£2.8m the previous year), but from November there was an underlying profit as the benefits of scalability started to come through.
A strong pipeline of new relationships and upgrade opportunities with existing partners also suggest that Bango might need all of this capacity.
Significantly, these included a new payment method for customers of global online retail behemoth Amazon in Japan.
Amazon customers with a KDDI or NTT DOCOMO mobile phone account can now pay for physical goods from Amazon.jp by simply adding the cost of the goods to their mobile phone bill.
The system saves all the faff of adding a credit or debit card to an online account and remembering the three-digit security code and so on.
Payment processor: Bango has already processed hundreds of millions of digital content payments for Amazon, Microsoft, Samsung and Google
The Japanese e-commerce market is estimated at $100bn annually and Amazon is the market leader, so the deal should be meaningful for Bango and there are plenty of other opportunities in the pipeline.
The fixed cost nature of its platform should mean a large proportion of any increase in revenue drops through to the bottom line or profit.
Amazon was a major breakthrough for the group not only in the size of company but also the type of product as previously it was enabling payments for apps and games such as Pokemon GO.
Bango’s tech simplifies the way customers to buy goods or digital content like apps, games and music on our phones and tablets.
Once users are ready to complete their purchases, they just click once and they’ve paid.
The payment is charged to the user’s mobile phone bill, meaning that there is no need to enter card details or any other personal information.
Essentially, you can make purchases whenever, wherever and in one tap.
Gaming craze: Amazon was a major breakthrough for the group not only in the size of company but also the type of product as previously it was enabling payments for apps and games such as Pokemon GO
The firm says that its technology reaches more people and delivers a higher conversion rate than any other method.
Within a split second of pressing the buy button, Bango is able to work out the user’s identity; which operator the customer is paying through; if funds are available to make the purchase; as well as anti-fraud information to help secure the payment.
Bango has already processed hundreds of millions of digital content payments for Amazon, Microsoft, Samsung and Google.
For each of these purchases made using Bango’s payment platform, the firm takes a small percentage.
Bango also collects data by the masses from these transactions, which it uses to generate unique insights into customers’ buying habits.
It uses the information to offer optimisation recommendations to its partners about how they could improve the user experience and, more importantly, how they could increase their conversion rate.