MIDAS SHARE TIPS UPDATE: Hold on to our tip Boku that tripled in a year

Midas gave Boku a 59 cent tip at the start of the first lockdown, when stay-at-home consumers around the world watched, played and paid for everything on mobile phones.

The online payments business had risen to £1.74 per share a year later in March 2021, when readers were advised to make some profits.

Last week, Boku showed that it still has a winning formula when it comes to payment technology. It announced first-half results showing that local payment methods now account for a fifth of sales.

Local payment methods are – as the name suggests – transactions that are only used in certain parts of the world. They are becoming increasingly popular with an emerging global middle class that is bypassing traditional credit card brands and moving straight to country-specific e-wallet payments, whether buy now, pay later, or pay via SMS.

Thanks to Boku, customers using these methods can pay for subscriptions using Spotify, PlayStation and Netflix on their phone.

By doing more business with these ‘mega traders’, Boku can continue to increase sales without having to attract new customers, according to stockbroker Peel Hunt. So as long as payment methods remain fragmented around the world, Boku will thrive.

Profit after tax fell due to the company’s sale of a division, which left it with a one-off profit last year. But adjusted earnings before interest, taxes, depreciation and amortization (a key measure of core profitability) rose 28 percent. Based on this metric and the company’s enterprise value, Peel Hunt estimates that Boku is trading at a 25 percent discount to its peers. The company has no debt.

Change is on the horizon for Boku, with respected chief executive Jon Prideaux moving to a non-executive position. The new boss, Stuart Neal, is Boku’s former Chief Commercial Officer and former commercial director of Barclaycard. He has a lot of knowledge of the company and the sector.

Boku’s share price performance over the last twelve months has been impressive, up 41 percent since September 2022, even if they are still below the highs they reached in March 2021, when we advised some profit taking.

Midas judgment: The rapid rise of local payment methods as a revenue driver for Boku shows that this company is nimble and able to capitalize on trends. The decline in cash isn’t going to slow down anytime soon, and Boku’s work with major companies from Netflix to Amazon gives it plenty of room to grow.

Analysts have upgraded their forecasts following Boku’s results, and the company’s debt-free status gives it room to invest. By most measures, the shares look like a good bet.

There’s no denying that, having had a very good run after Midas first tipped them in 2020, they’ve fallen back from their heights in 2021. However, at £1.46 they’re worth snagging for the next chapter of the Boku story.

Traded on: GOAL ticker: BOKU Contact: boku.com or via IFC advice on 020 3934 6630