It’s about a year since City broker Cenkos tipped Bango plc (LON:BGO) to move into profitability, since when the shares have shot up 150%.
Small wonder that Tuesday’s interims from the mobile payments company were eagerly awaited with a little trepidation by Bango shareholders. Mindful of the old adage to "buy on the rumour, sell on the fact", would Bango's numbers satisfy the expectations of the market?
Well, let's put it this way: the shares rose 4.8%.
Prior to the results statement, shares in the group, which enables payments for apps and games including Pokemon GO, has received a turbo-boost from July's statement that the end user spending (EUS) run rate at the end of June 2017 had risen to £300mln a year from £195mln a year at the end of 2016.
Cenkos analyst Ian McInally had previously estimated gross EUS would rise to £258.9mln for 2017 and to £498mln by 2018, at which point he predicted the group would be generating £8.2mln of gross profit with positive earnings of £3mln for the year.
He's probably revising his figures as I write this because the September interim statement revealed annualised EUS at the end of August was running at more than £400mln, compared to a run rate of £167mln at the same time last year.
That's a prodigious growth rate in anyone's book, and although the company is still losing money, losses are narrowing rapidly - adjusted underlying losses, or LBITDA, for the first half of the year totalled £1.01mln versus LBITDA in the same period of last year of £1.64mln.
“New capabilities and unique innovations added to the Bango Platform over the last few years are now starting to be used to open similar opportunities worldwide. Bango continues to invest in the development of its platform to embrace additional routes and markets and attract further innovation on the Bango Platform,” said chief executive, Ray Anderson.
The AIM-listed firm said its cash at the end of June was £5.6mln, barely changed from £5.7mln at the end of 2016, and sufficient, the company claimed, to carry it through to profitability.
What does Bango do?
In its own words, Bango makes it easier for customers like you and me to buy digital content like apps, games and music on our phones and tablets.
Once users are ready to complete their app store purchases, they just click once and they’ve paid.
The payment is charged to the user’s mobile phone bill, meaning that there is no need to enter card details or any other personal information.
Essentially, you can make app store purchases whenever, wherever and in one tap.
The firm says that its technology reaches more people and delivers a higher conversion rate than any other method.
Within a split second of pressing the buy button, Bango is able to work out the user’s identity; which operator the customer is paying through; if funds are available to make the purchase; as well as anti-fraud information to help secure the payment.
How does it make money?
Bango has processed hundreds of millions of digital content payments for the likes of Amazon, Microsoft, Samsung and Google.
For each of these purchases that is made using Bango’s payment platform, the firm takes a small percentage.
It doesn’t stop there
Through all these transactions, Bango collects data by the masses, which it uses to generate unique insights into customers’ buying habits.
The company can then use this information to offer optimisation recommendations to its partners about how they could improve the user experience and, more importantly, how they could increase their conversion rate.
Did someone mention the soaring share price?
Bango shares are up 247% year-to-date with the main catalysts being an upbeat full-year results statement in March and, perhaps more significantly, the announcement of a new payment method for customers of global online retail behemoth Amazon.
Amazon customers with a KDDI or NTT DOCOMO mobile phone account can now pay for physical goods from Amazon.jp by simply adding the cost of the goods to their mobile phone bill.
The system saves all the faff of adding a credit or debit card to an online account and remembering the three-digit security code and so on.
"Internet usage in Japan is mobile-first, with billions of dollars in online purchases charged to Japanese consumers' phone bills" said Ray Anderson, Bango’s chief executive officer.
"The Bango platform ensures global retailers can offer these customers the trust and transparency they want from a payment method, and can deliver this at scale," he added.
The Japanese e-commerce market is estimated at US$100bn annually and Amazon is the market leader, so the deal should be meaningful for Bango.