London, UK, 20 March 2024

Edison issues outlook on Boku (BOKU): Making the complex simple for global merchants

Boku’s strategy to widen its offering within the local payment method (LPM) market accelerated FY23 revenue growth to 30%, with 15% growth from the core direct carrier billing (DCB) business and supplemented by 153% growth from eWallets and real-time payments. EBITDA grew 27% y o y as the company continued to invest in building out its LPM network from a technological and regulatory perspective. With all major merchants using or planning to use Boku’s wider portfolio of payment methods, the company should benefit from faster growth in the non-card payment market and be able to leverage the investment it has made in its mobile-first platform to drive growth in earnings and cash generation.

Boku is trading at a small premium to its peer group on FY24/25 EV/EBITDA multiples. Via a reverse discounted cash flow (DCF) that uses our forecasts to FY26 (which are more conservative than the company’s mid-term targets would suggest) and a WACC of 9%, we estimate the share price is factoring in revenue growth of 4.5% and average EBITDA margins of 35% for FY27–33, well below the company’s targets. In a DCF factoring in meeting the targets by FY27, we estimate the shares could be worth 251p. A growing contribution from Amazon, continued adoption of LPMs and new major merchant sign-ups are the main triggers to achieve this, in our view.

 
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