In this note we initiate formal coverage on Bango. In our view the growth outlook for mobile payments remains favourable and Bango is well positioned to be a key beneficiary of market growth. The Group’s recent history of execution is strong, as is its financial position. Following seventeen years of investment, the Bango platform is state-of-the-art and sufficiently scalable to support the anticipated business expansion.
Favourable growth prospects in alternative payments: The global e-commerce market is vast, with a favourable (double digit) outlook for near-term growth. Alternative payment methods have already overtaken traditional methods and are expected to continue to take market share over the next five years. Our analysis shows that mobile payments via Direct Carrier Billing (DCB) is a growing (15% in 2015) piece of the overall payments pie.
Strong execution: Bango’s core product is the Bango Payment Platform, a unique software architecture that allows mobile users to make one-click payments to online merchants via their mobile phone bill or wallet, on a massive scale. Bango has been particularly successful in the dominant Android market, which now powers mobile devices, connected homes, and smart vehicles. Broadening the reach of the Bango Payment Platform has driven impressive revenue on End User Spend of around 2%.
Platform gives competitive advantage, enables scale: Long-term investment in technology gives Bango a considerable competitive advantage over first generation payment integrators. As volumes grow, Bango’s unique platform approach across multiple stores and in multiple markets generates spending data unavailable to payment integrators without its technology or market position. Consequently, stores, merchants and payment providers are increasingly benefitting by consolidating their activity through the Bango Payment Platform.
Solid financial position, funded through to profitability: Bango closed FY 2016A with gross cash of £5.6m. We estimate this will be sufficient to fund the Group through to profitability and positive cash flow. It also has a marketing advantage given that Bango’s blue-chip multinational client base values financial strength.
Forecasts introduced: We introduce forecasts on Bango for the first time. These are summarised below and detailed within.