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I have been looking at Bango BGO for quite some time and I even used to hold the Shares probably around 10 years ago. Back then I found it a bit frustrating and I can’t even remember what the outcome of my buying back then was, but it strikes me that BGO are in a much nicer place these days and the huge gains in computing power and network speed etc. have conspired to make their offerings a lot more relevant and valuable. This ‘faster’ technology has also enabled an increasingly important aspect of their offering around Data Analysis and targeted marketing.
The move to a ‘Cashless Society’ and the increase of Digital Payments has been a Big Theme that I have played a few times in recent years and the last thing I held, Optimal Payments OPAY which became Paysafe PAYS, was taken-over and it had to leave my Portfolio. I am not whingeing because I did pretty well on it, but I am very happy to have another Payments play in the WD40 (see my ‘Portfolios’ page on WD1 for the full list of the stocks I hold).
I bought a Starter Position in BGO back on 16th June 2020 in the form of a Long Spreadbet and I expect to buy more as Normal Shares once I have the spare Cash and I am happy that the Markets are not about to take a huge plunge or anything. The Summer and going into Autumn can be dodgy times for Markets and this makes me a bit cautious with regards to doing much, and of course the full extent of economic damage from the C19 Lockdowns etc. is still very unknown. I am patient and I can wait for the play to come to me. Simon Thompson in ‘Investors Chronicle’ covers Bango and has a “Buy” on it and on the whole his stock picking is pretty decent so I am happy to latch onto his coattails when he finds something interesting. Apart from his bizarre aberration of tipping several Chinese AIM Stocks several years ago, and I would say a patchy record on Resources Stocks, he tends to get things right and has selected many huge winners. Company Overview At a very high level, Bango provides a Payments Platform to Mobile Operators through which End-Customers can buy items or services through their Mobile Device which then get charged to the End-Customer’s Fone Bill, and Bango takes a tiny percentage for the provision of the Platform. In addition, as the number of End-Customers paying for stuff through the Bango Platform increases, Bango can provide ever more valuable Marketing Information which helps Mobile Operators and Product/Services Providers to target Campaigns etc. to boost Revenue growth – which again helps Bango as they get a cut. I copied the text below from the Bango Website and it seems to cover what they do pretty well: ‘Bango payment technology powers the global leaders. More major app stores have activated billing routes through the Bango Platform than any other carrier billing provider, and today Bango technology powers more app store carrier billing deployments than anyone else (Progressive Equity Research Limited ("PERL")). Reaching a larger share of the people than ever, Bango has an addressable base of over 1.7bn. Only Bango processes carrier billing transactions across all four major US MNOs (Mobile Network Operators), representing more than 300m connected devices. The Bango Platform is designed to ensure that payment can be collected for any content or service, sold from any internet enabled device, using any alternative payment method. Bango post-launch technology is proven to deliver higher revenues of between 20-40%. Award-winning Bango Boost technology provides insights and recommendations to payment providers and merchants, giving partners that integrate with the Bango Platform an important competitive advantage. As more customers and partners adopt the Bango Platform and as more transactions are analyzed by Bango technology, the platform becomes increasingly powerful, providing unique insights that drive revenue growth. This in turn drives more customers to use the Bango Platform, fueling a virtuous circle of success for the Bango Platform and the internet industry.’ They call the Marketing Insight capability the ‘Bango Marketplace’, and this text I pinched from the Bango Website below helps explain it. Note the Chairman Ray Anderson always seems to emphasize this aspect of their offerings as a key element in their growth: ‘Bango Marketplace Where app marketers go to immediately reach paying users Created using payment information gathered across over $1Bn of in-app purchases, Bango Marketplace audiences get you straight to the paying users. 1. Select from the audiences of paying users 2. Run your Facebook campaign using the chosen audience 3. Reach new paying users and grow your revenue.’ The screenshot below should give a hint as to what kind of Marketing Insight information is available, this time for the UK. If you look on the Bango Website there are loads of examples like this and they call them ‘Bango Audiences’ where groups of End-Users are sliced and diced for targeted Marketing Campaigns. As with all the images I show, if you click on them they should get larger on your screen so you can see more detail.
The Link below is to a very short video (2 minutes or so) that explains the concept of how Bango Marketplace can help App Developers target paying End-Users:
https://youtu.be/pU-98EsejOM The Screenshot below is from the front page of the Bango Website and in effect classifies their target customers into App Developers and Payment Providers (these are the Mobile Network Operators), and the text addresses at a high level what Bango can offer them.
Something a bit strange about how they have done this segmentation of their Customers is that they appear to have missed an important one out !! Online Stores are a major Customer for Bango and you can see more on what they offer here:
https://www.bango.com/carrier-billing There is another group of Customers as well. These are Resellers of other Retailer’s Products and an example of this would be if a Mobile Operator resells products that are sourced from Amazon such as Videos from Amazon Prime. This might help explain it: https://www.bango.com/resale Obviously because of how Bango takes a tiny percentage of the Total Revenues that go through its Payments Platform, it is in the interests of Bango to encourage Retailers and Resellers to use their Marketing Insights and to grow their End-User base. Audiens Customer Data Platform This is something Bango acquired fairly recently and is in effect a much more sophisticated and advanced capability to obtain Marketing Insights and to create Marketing Programmes from the Bango Database. You can read more about it here: https://www.bango.com/audiens https://audiens.com/ Growth I particularly like this slide from the Bango Strategy Day January 2020, and you can find that Presentation via the link below: https://bangoinvestor.com/key-financial-documents/
…….and these 4 slides:
Company Website
You can find it here: https://bango.com/ Key Risks
Key Attractions
Company History Bango was formed in 1999 and Listed on the London Stock Exchange in 2005. You can read more on the History under the bit headed ‘Bango’s Journey’ on this page: https://bango.com/about Strategy I took this text from the 2019 Annual Report which you can find at this link: https://bangoinvestor.com/key-financial-documents/ ‘Strategy for Growth The Bango growth strategy is to process and analyze payment data to produce unique insights that drive more consumer spending. Payment data is collected through Bango payment processing activity and through partnerships with a range of payments businesses. Bango technology derives payment behavior insights and turns these into marketing audiences that are used by app developers and other online businesses. The combination of payment processing with more effective marketing creates a virtuous circle. As increased marketing effectiveness attracts more paying customers, so the amount of payments processed grows, which produces more payment data. This can then be analyzed to produce further improvements in marketing effectiveness Growth drivers Bango benefits from multiple factors that drive growth. First, Bango works with the world’s largest internet businesses, including Google, Amazon and Microsoft who activate more routes, in new markets and offer new products and services through Bango. Secondly, the unique benefits of the Bango virtuous circle attract new customers to join the circle. Bango data insights enable merchants to derive more revenue from marketing activity. Finally, Bango technology enables these merchants to reach and acquire more customers. Process increasing volumes of payments Leading online commerce businesses use the Bango Platform to process their customer payments on a global scale. They use it to activate new forms of payment such as Direct Carrier Billing and mobile wallets. Bango processes hundreds of millions of transactions a year, including payments for physical and digital goods, and from the resale of digital services. As Bango partners expand their relationships into new markets, and offer new products and services, transaction volumes increase. New merchants are attracted by the success of existing partners and the opportunity to capitalize on the payment insights available through the Bango Platform. The technology architecture needed to accommodate this high growth strategy must be highly scalable, very robust and yet operate at a low and stable cost. Bango therefore builds the systems and software that together form the Bango Platform can be operated and evolved at low cost. Boost marketing effectiveness The high volume of transactions the Bango Platform processes every year generates a vast pool of consumer payments data. Bango systems collect and organize this data securely and in compliance with the latest consumer data protection standards. Payment transactions generate valuable insights that help developers to boost revenue from their marketing activities. A strategic challenge is to ensure that the analysis of data, and the preparation of insights and audiences meets evolving data regulations. With a heritage of billing grade privacy and security, the Bango Platform has the architectural flexibility and systems in place to accommodate current and future requirements. Developments such as General Data Protection Regulation (GDPR) and California Consumer Privacy Act (CCPA) benefit Bango as they standardize regulations and build consumer confidence. Audience sales The Bango strategy is to monetize data collected from payment providers, by enabling app developers to use audiences created from this data to improve marketing effectiveness. The Bango Platform creates audiences from payment transactions and other data sources, and offers these audiences to developers through Bango Marketplace. These unique audiences, are proven to increase the percentage of users that make a payment after they install an app. Bango expects that its strategy will attract more customers to the Bango Platform. Bango has developed its platform and processes to engage with a larger number of customers, enabling significant scale through Bango Marketplace. To do this, Bango must continue to attract and retain employees with the necessary skills and experience. Therefore Bango has to continue to be a great place to work, and Bango must continue to deploy and develop its THRIVE values to support the personal and professional goals of talented employees.’ The Slide below from the Bango Strategy Day January 2020 tries to show this in pictorial fashion and they seem to like their ‘Virtuous Circle’ model:
Competitive Environment
As ever, this is the most difficult section to write and there is a lot of guess work and assumption required. In one sense in terms of competition for Shareholder’s Money, the obvious rival to Bango is Boku Inc. BOKU which is a fairly recent listing and also involved in Direct Carrier Billing. There is a link on the Bango ‘Investors’ part of their website to a Progressive Equity Research Note regarding a recent BOKU acquisition, and you can read that here: https://bangoinvestor.com/wp-content/uploads/2020/06/BGO-20200622-Thoughts-on-MA-in-the-DCB-Sector.pdf This bit of text right at the start is interesting: ‘Boku Inc has announced the intended acquisition of Fortumo Holdings. In our view the deal has strong industrial logic for Boku, but highlights the differences in strategy compared to DCB competitor Bango. Bango is more focused on the data and marketing opportunities that arise from mobile payments, whereas Boku highlights broad coverage and low cost alongside its push into mobile identity.’ The Note also points out that BOKU has grown through acquiring 6 DCB businesses over 12 years and it suggests to me that the precise competition for Bango comes from smaller and perhaps less developed DCB payments companies. This bit is helpful as well: ‘Boku and Bango are leading players in DCB, but in our view that is where the similarities end. The Fortumo acquisition further highlights the differences in the two businesses and while the deal aligns to the Boku coverage and cost strategy, by the same token it is not a deal that would have made strategic sense to Bango management.’ Note the comments about BOKU and Bango both being ‘leading players’. Personally, I am comfortable with the Competitive Environment as I perceive it for Bango. The simple reality that all Private Investors need to face is that we cannot ever know 100% about a Stock and to a large extent we need to take appropriate Risk Management measures to limit the impact of our assumptions if they are found to be wrong. For example, I am limiting my Position Size on Bango to a maximum of 3.5% or so and I hold a diverse Portfolio of 40 Stocks which reduces the individual risk from any particular screw-ups. I can fully understand Readers wishing to do more research around this particular area and that is a personal choice !! Risks You can find a pretty summarized Risk List on pages 10 and 11 of the 2019 Annual Report here: https://assets.ctfassets.net/tlyywrmp30mw/1Esw56X6v6DtbIM4UJB6HY/795a4f05deb716f10b77ee679bc2d07f/bango-annual-report-fye19.pdf I see the main Risks as follows (I have taken a few from the list in the Annual Report):
‘Bango processes data belonging to customers and individuals as part of its business. There is a risk that such data could become public if there were a failure of systems or security. Policies, systems and procedures have been implemented, and products developed, with privacy in mind, to minimize risk to all. The extensive testing of Bango by its major partners as part of ongoing supplier monitoring, minimization of data, and the unique way Bango technology is used, gives assurance that this risk is appropriately mitigated. A data breach register is maintained and kept up to date.’
Why Invest in Bango?
Listing Details Index AIM Description of business ‘Bango is a technology business. It has developed and deployed a unique open, global infrastructure platform to enable content providers to market, sell and deliver their products and services directly to mobile phone users using the mobile internet.’ That text is obviously taken from what Bango say about themselves in the AIM 26 Rule section. I thought it was a nice succinct summary so I lobbed it in here !! Country of Incorporation England and Wales Company Registration Number 05386079 Registered Office 5 Westbrook Centre Cambridge CB4 1YG Subsidiary Offices Bango has many Offices as shown on the Screenshot below:
Company Secretary
R. Greenhaigh Nominated Advisor (NOMAD) and Broker www.finncap.com Finncap 60 New Broad Street London EC2M 1JJ Financial PR Advisors www.fticonsulting.co.uk FTI Consulting 200 Aldersgate Aldersgate Street London EC1A 4HD Legal Advisors www.mills-reeve.com Mills & Reeve Francis House 112 Hills Road Cambridge CB2 1PH Auditors www.rsmuk.com RSM Second floor, North Wing East City House 126-130 Hills Road Cambridge CB2 1R Bankers HSBC Bank PLC 8 Canada Square London E14 5HQ Annual Reports You can find the Annual Reports and several Presentations here: https://bangoinvestor.com/key-financial-documents/ It’s nice to see they have the information going back to 2003 but I am not sure how useful it would actually be to trawl back that far !! Directors You can find some stuff about the Directors and other Roles at the link below and I have included some Screenshots for the key individuals. https://bango.com/people Executive Chair and Founder – Ray Anderson
CMO and Founder – Anil Malhotra (I assume CMO means Chief Marketing Officer !!)
Chief Executive Officer – Paul Larbey
Looks like Paul Larbey has only been at Bango for a couple of years.
Chief Financial Officer - Carolyn Rand
From scanning through the RNS Statements for Bango on my ADVFN App, I see Carolyn joined in October 2018.
Director’s Pay The details on Remuneration can be found in the 2019 Annual Report on pages 25 to 27. The image below comes from page 27. I am no expert on pay levels but I don’t see these as looking wildly out of line with what I would expect although it is notable they received a lot more in 2019 than 2018 so the rate of increase might be something to monitor in coming years – especially if Bango fails to deliver the growth I would expect.
Director Shareholdings and Major Shareholders
I took the image below from SharePad on the evening of Tuesday 7th July 2020. I note both Ray Anderson and Anil Malhotra have decent holdings and also the first 4 Fund Managers in the list I would categorise as pretty shrewd Investors (and so is Cavendish on the whole !1).
Recent Director Dealings
I have taken the 3 screen images below from SharePad on the evening of Tuesday 7th July 2020. There are pages and page of stuff on the SharePad system so I have only shown the fairly recent activity. My assumption is that all the sort of blank entries are things like Option Incentive Schemes or similar.
Calendar
I have taken the Screenshot below from SharePad and used the ‘Ctrl +’ function to zoom in and make the text nice and big for Readers to see easily.
That’s it for Part 1. I have loads on but I will try and get Part 2 completed in the next couple of weeks. In particular that will look at Valuation and Targets which I know Readers are very interested in.
Cheers, WD.
2 Comments
Gamwah
7/16/2020 09:49:28 am
Thanks for the detail here, looking at this one after hearing on the pod and this is very helpful. cheers
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WheelieDealer
7/31/2020 12:59:46 pm
Hi Gamwah,
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