MIDAS SHARE TIPS: Binge watch all your favourite TV shows – AND enjoy a share in profits they make 

In the world of e-commerce, it is easier than ever before to buy everything from washing machines to video games. But consumers are increasingly impatient. They want to make purchases instantly and effortlessly.

Boku, a small technology business with big connections, helps them to achieve that ambition. The group has pioneered a way for people to pay for music, video games, movies and hundreds of apps via their phone bill.

For consumers, this means that they can buy all kinds of digital services with just one tap of their mobile phone.

Heavenly option: Boku helps users pay for access to TV hits such as The Good Place, starring Ted Danson, left

For companies, too, there are significant benefits because the ease of purchasing encourages customers to buy.

The group is almost certainly a beneficiary of coronavirus too because, when consumers are forced to stay at home, they tend to watch, listen to and play more stuff online – and for many, that means via their mobile phone.

A recent trading update from Boku, for example, showed increased business in many Asian countries, as people’s movements were restricted – and there should be further positive news when Boku reports year-end results later this week.

Yet the shares have fallen this year from 86p to 59p. The decline reflects neither current trading nor future prospects and the shares should bounce back in time.

Boku was only founded in 2009 but around 190 mobile phone networks, including operators such as EE, Vodafone and O2, now use its technology. This huge network has persuaded online giants such as Apple, Google, Spotify and Netflix to sign deals with Boku so their customers can sign up for new subscriptions, access the latest games and binge watch TV series faster than ever before.

The system seems to work for all sides and Boku’s one-tap, straight-onto-the-phone-bill service is used by more than 18million people in 65 countries, including the UK, Germany, Japan and South Korea, as well as emerging economies such as Indonesia and Thailand.

Looking ahead, chief executive Jon Prideaux has big ambitions for this business. Not content with having turned the mobile billing divisions from loss-making to highly profitable, he is determined to add more strings to the Boku bow.

In 2018, he acquired Danal, a California-based firm that allows companies such as Paypal, Experian and Western Union to ensure the identity of customers who access their services via mobile phones. Many businesses do this by sending a six-digit code via text message, which customers then have to tap into a website. 

Today’s impatient consumer finds this annoying but, with Danal, that step is removed. The US firm is at an early stage but it has already signed up the US tax collector, the Inland Revenue Service, as a customer and new names are coming on board all the time.

In recent months too, Prideaux has moved into the so-called mobile wallet field. In the West, most non-cash payments are made with debit or credit cards. In Asia, around half of all transactions are made using mobile wallets, where users store money on their phone, like the digital equivalent of a leather purse.

Many mobile wallet operators are nationally based so users can only buy goods from domestic firms. Prideaux is working with his big international customers, such as Spotify and Netflix, so Asian consumers can use their mobile wallets to buy these services too. Boku only moved into this division recently but early signs are encouraging.

Last week, the group signed a deal with South Korean game developer Pearl Abyss, the firm behind Black Desert, a game that has won fans across the world. Pearl Abyss customers will now be able to purchase and download games using the one-tap mobile phone facility or via their eWallet, choosing whichever payment mechanism works best for them.

There should be further similar developments this year, as Prideaux acquires more customers and works with more wallet providers.

Boku floated on AIM in 2017 at 59p and was initially a stock market darling, rising to £1.84 by the summer of 2018. But the shares then tumbled. American venture capitalists, who had supported the group before flotation, took profits and some investors were concerned about the Danal acquisition, as the business was loss-making when Prideaux bought it.

Over time, however, the idea is to expand the services that Boku offers so the group works with more large businesses, offers them more ways to interact with their customers and thereby becomes increasingly profitable.

Midas verdict: Boku shares have seesawed in recent weeks. But the current 59p price is undeserved. For investors who are prepared to buy in today’s volatile market, these shares look like a bargain.

 

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