Bango Share Discussion Threads

[glawsiain] 20/9/2017 13:11

Bango is also covered today (and rated a speculative buy) in the main share tips section (written by harriet clarfelt). Nothing like the details of simon thompson but in generally positive:

"Highlights for the period included the new partnership with Amazon to enable direct carrier billing for customers buying physical goods in Japan. This partnership could be highly significant: management says the launch reaches over 75 per cent of Japanese users of Androids and iPhones – a potentially huge end market. Mobile operators are also swapping their incumbent payment platforms for Bango, with two Middle Eastern operators doing so in the first half"

[chimers] 20/9/2017 12:55

And to put what they have been saying re BGO for the past 6 months and more in laymans terms is.................

THIS IS YOUR ASOS.

There will NEVER be another ASOS................apart from...........

This is it , this is your chance to quit the rat race and make serious dosh.

This is ASOS 2

" To put the growth potential into perspective, industry experts believe that the DCB market could generate transactional value in excess of $25bn (£18.4bn) by 2020."

[chimers] 20/9/2017 12:50

Its not some tatty tip sheet ffs its the Investors Chronicle it's owned by the Financial Times.

IT "IS" THE FINANCIAL TIMES ffs!!

Its been around since electricity.

[chimers] 20/9/2017 12:47

You see people EVERYTHING that was posted on the IC online "TODAY" goes into print on FRI.
So you get the weekend readers piling in on Monday.

YOUR AHEAD OF THE GAME.

This buy tip which is a phenomonal one if you read it all (cant you?............awwwww) will be in WH Smiths on Fri.

Subscribing gets you the juice along with first dibs.


YOUR AHEAD OF THE GAME.

Use it.

[chimers] 20/9/2017 12:28

The IC online its best you subscribe your trading blind without it.

"The exit run-rate of end-user spend (EUS) processed through its payment platform hit £300m at the end of June, up from £195m at the start of the year, and has since accelerated to over £400m at the end of August, or 42 per cent ahead of analyst Ian McInally’s forecast at house broker Cenkos Securities. This prompted him to raise his exit 2017 and 2018 EUS forecasts by 8.8 per cent and 19 per cent, respectively, to £452m and £913m, but even those numbers could prove conservative given the strong drivers behind the ongoing growth."

[chimers] 20/9/2017 12:22

From the IC I suggest you subscribe to get the full article.

" For example, chief executive Ray Anderson told me during our results call that two Middle Eastern mobile operators who migrated their Google Play routes to Bango’s platform in the first half saw a 35 per cent increase in their EUS immediately, highlighting the benefits of the company’s big data product, Bango Boost, which enables more cost effective and targeted marketing programmes of a client’s content and services. This can only lead to further migration of established Google Play routes to the Bango Platform. Mr Anderson has identified “sources of migrations that can bring in billions of dollars of EUS”. The groundbreaking direct carrier billing agreement (DCB) with Amazon Japan, which started in June, is also noteworthy."

[nimbo1] 20/9/2017 12:16

thanks for both your posts.

It looks like the market likes the results - there is demand for the shares, I suspect buyers are trying to hide how much!

[simonsaid1] 20/9/2017 12:15

Simon Thompson just posted again, Strong Buy recommendation with 300p target price reiterated.



Some interesting stuff:

'Furthermore, following the announcement of the Amazon deal, other online international retailers who want to tap into the huge Japanese retail market have been in contact with Bango with a view to using its mobile payment platform. Bango is also targeting the payment platform in other similar mobile centric countries in the Asia Pacific Rim, Singapore and Taiwan, being notable areas.'


'To put the growth potential into perspective, industry experts believe that the DCB market could generate transactional value in excess of $25bn (£18.4bn) by 2020. Based on a market share of 8 per cent this would give Bango an annualised end-user-spend of $2bn in three years time. Assuming its gross margin declines from 1.79 per cent in the first half this year to 1.4 per cent by 2020, reflecting the lower fees earned on high volume routes, then on £1.5bn-worth of transactions its gross profit could soar to £20m and generate north of £10m of post-tax profit, a chunky sum relative to Bango's current market capitalisation of £155m. I would also point out that Bango has accumulated tax losses of £35m to offset against future profit, reflecting the substantial spend in its platform and marketing channels, so shareholders can expect a chunk of future profit to be tax free.'


Lots more great stuff in that column.

[simonsaid1] 20/9/2017 12:14

I love researching Bango, because the more I dig, the better it looks. Really a unique type of play on AIM, and I strongly suspect not long for this market. A few years down the line this may well list on the FTSE, unless it's bought by a major (would have to be at a premium though, given the strong cash position and imminent move to profit).

That would be transformational as the index funds and probably many managed funds buy in (the prior being forced to, the latter merely likely). Given the relative simplicity of Bango's business model, I can't see the more onerous reporting standards of the 'big boy index' being any sort of problem for them either.

[muffster] 20/9/2017 11:42

Great posts Simon, Lentjes.

[simonsaid1] 20/9/2017 11:24

Good point Lentjes. Normally when a major 'swoops' and eats a small company's breakfast its because they can operate on lower margin, higher volume. But the genius of Bango is they have these economics from the start. It's already evident that this is allowing a small Cambridge firm to play with the big boys. Really quite ingenius and a textbook example of a disruptive tech play, but unlike many of those (Uber, Netflix, Spotify) this one is actually profitable.

[lentjes] 20/9/2017 11:16

Great post Simon

Also don't forget how this low cost base and low margin / profit approach makes it very difficult for competitors to compete against Bango.

[smallcapinvestor1] 20/9/2017 11:13

The metrics to focus on now are revenues from eus versus platform costs rather than revenue as a percentage of eus. For instance, If £500k revenue can be added from eus at 0.5% margin yes it drags the overall margin down but who cares as it drops to the bottom line for no extra cost.

[simonsaid1] 20/9/2017 10:44

The commission taken from EUS varies by contract, this is not news, this is how Bango has always operated. From the Bango Strategy Day presentation we learned that there are 3 revenue models used for various clients:

• Typical app store model – almost all contracts to date
– Revenue is transaction fee based on % of End User Spend (EUS)
– Volume based so that fee % reduces at higher volumes
• Alternative model
– Revenue is per transaction (high value or using authentication)
• Success based model
– Revenue is share of additional EUS due to Bango Boost faster growth

In model 1, larger customers with greater cumulative EUS (not transactional as far as I can see) get lower commission rates. This is Bango acting like any other business. As revenue grows, more aggressive discounting can be applied (in this case by lowering EUS commission take), and this functions as a kind of volume discount. This is the same principle that Amazon, Walmart et al apply in retail by using volume and putting the cumulative bottom line ahead of per-transaction profit.

Revenue per £ of EUS will fluctuate depending on what size customer is contributing what level of revenue to the business, and which of the 3 revenue arrangements they have with Bango. No doubt Amazon will pay less since their projected cumulative transactional volume will be huge - Bango will still make plenty, even with what we assume to be a lower commission (having worked with Amazon professionally I can vouch for their aggressive discounting practices when dealing with any kind of partner or supplier). If this was not advantageous for Bango, they wouldn't bother with the deal, unless there was promise of future business (which in the case of Amazon would be huge, as every added territory could be company-making for Bango, as many of us strongly suspect will happen).

My point is: Don't interpret profit from EUS as a metric for the company's success, any more than measuring Amazon's profit from each item sold to measure their success. This is a volume business, not luxury goods etc. As long as volume of transactions and bottom line profit grows, and costs are kept down as much as possible, the business is functioning correctly.

Hope I've explained myself reasonably well. We'd all like more profit per dollar passing through Bango's systems, but given the low cost of additional EUS volume (now tested to £5bn with no additional infrastructure investment!) there's clear incentive to operate in this way and grow the business. Indeed, we have seen before than expanding even further carries astonishingly low cost. The Strategy Day presentation estimated that adding each $bn of transactional capability costs Bango just $30k in infrastructure investment, and this was some time ago when total capability was thought to be $2bn, we're now up to 5.

Other ways of capitalising on volume present themselves accordingly, such as analytics via Bango Boost, which is beginning to become a significant contributor to overall volume and profit, and has the benefit of making customers happy as their take increases too. Rising tide lifts all boats.

[amt] 19/9/2017 21:43

Mobile2 yes at the time 55m seemed a big number but now at 400m annualised its not so significant. The phenominal growth is mistly organic.

[muffster] 19/9/2017 20:20

Still don't see your point gs. All reads well to me and growing

[gsbmba99] 19/9/2017 18:35

EUS doubled from 1H16 to 1H17 in part because they bought Bill 2 Mobile on 9 May 16. It had £55m of annualised EUS. Call it £27.5m per half year. So, £92.3m / (£46.17m + £27.5m*19/26) = 39.3% on a more comparable basis.

My point was more the volatility on revenue as % EUS and the fact that they appear to generate very little additional revenue from increases in EUS. From a historic perspective, it suggests to me that they potentially have tiering in contracts that bring revenue % EUS down over time. Looking forward, it could be the Amazon effect. It seems unlikely to me that Amazon would be offering a billing route that cost them substantially more than a debit or credit card payment.

[amt] 19/9/2017 17:59

Exactly eus is quoted at a point in time and annualised. So probably fair to say the eus for h2 will be in excess of 400/2 =200.
That means gp of 3.4m plus so net profit of say at least half a million. So if growth rate continues 800m eus for next year and gp of 14 and net profit of 8. Year after that 1600m eus gp 28 net profit 22. Then 50 net profit 3 years out. Nice to dream but possible if growth continues at this rate.

[simonsaid1] 19/9/2017 17:40

Is there confusion arising from the fact that EUS for end of August was mentioned in the RNS, but the actual headline figures it covered only covered to the end of June? So effectively we got figures for H1, and then EUS for the first month of H2 thrown in for free, but that juicy 400m EUS run rate is not counted toward H1 headline results. I think it was included to show that after this period ended, there was a spike in EUS (but we won't see its effect on revenue till next results!).

'EUS for 1h2017 was £92.31m, up 100% from 1h2016 (£46.17m) due to growth from existing activations and additional EUS from new activations in 2017.

At the end of June 2017, the EUS run rate was over £300m/yr (1h2016: £159m/yr). Exiting August 2017 it had grown to over £400m/yr. Growth in annualized EUS came from all of the major stores integrated to the Bango Platform. Bango is on track to generate monthly revenue from EUS fees in excess of costs - generating a monthly operating profit at the end of 2017.'

[simonsaid1] 19/9/2017 17:11

Well that may be the 'Amazon effect'.

[lentjes] 19/9/2017 16:56

That would explain why they did not release an update of EUS at the March finals as the EUS had not increased, looks like the uplift in annualized EUS only came towards the end of the period at 300m end June and now 400m

[simonsaid1] 19/9/2017 16:46

Wish I understood any of that...

[gsbmba99] 19/9/2017 16:38

I have a really hard time understanding the trends with this company. 1H17 EUS was £92.3m and 2H16 EUS was £86.13m (£132.3m - £46.17m) for sequential growth of 7.2%. The revenue on EUS in 1H17 was £1.65m as against £1.64m in 2H16 for sequential growth of about 0%. Revenue as a % EUS went from 1.9% in 2H16 to 1.79% in 1H17. They generated an extra £10k on incremental EUS of £6.2m for revenue as % incremental EUS of 0.16%. Looking at the Equity Development numbers for 2017, they have EUS of £266m and revenue of £3.7m. That implies 2H17 EUS of £173.7m and 2H17 revenue of £2.05m. That equates to a reduction in revenue % EUS in 2H17 to 1.18%. Sequentially, that implies an extra £400k in revenue from an £81m increase in EUS equating to revenue as % incremental EUS of 0.5%. Is ED way below consensus? Why is revenue % EUS so unstable?

[simonsaid1] 19/9/2017 16:15

With barely a quarter of shares in public hands, it doesn't take a lot of buying or selling to substantially move the needle. The rapid growth of these shares this summer means plenty of profit takers are now exiting with their nice gains, but they'll be gone soon and there will be fresh meat when Simon Thompson writes it up later this week. We need new buyers to establish a fresh base.

All the right direction of travel!