Bango reminds Peel Hunt of early ARM, says 'buy'

Broker Peel Hunt began coverage of Bango with a 'buy' recommendation, saying the mobile payment technology group is reminiscent of an early ARM Holdings.

Peel Hunt set a target share price of 100p, offering around 60% upside to the closing price on Monday, based on discounted forward multiples as it does not forecast the AIM-listed company to break even until 2019.

Nevertheless, Bango's version of direct carrier billing (DCB) technology, which enables mobile app stores such as Google's Play and Amazon's appstore to customers to make non-card payments for app, in-app and content purchases like music, films and ebooks.

By building an agnostic platform, Bango has become the leading worldwide DCB provider, connecting almost every major app store with dozens of mobile network operators, or carriers, around the world, so instead of fishing out their credit card or using a service like Paypal, the customer will just directly add the purchase to their monthly bill from their MNO.

"Bango has developed a technology solution and business model that we believe is hugely scalable, in a market that is expected to grow significantly over time," Peel Hunt said.

The structural foundations are the massive smartphone penetration that continues to rise, with Gartner forecasting an installed base of over 5bn in 2016; app store spending forecast to double between 2015 and 2020 to circa $100bn; and finally that the broker estimates that DCB will grow from 2.2% today to 10% of all transactions by 2020.

"The company is structurally well positioned, underpinned by the growth of smartphones and apps across the globe," concludes Peel Hunt.

"We see ARM as a possible parallel – a technology company that spent several years developing its platform, awaiting a specific technology to become mainstream (ie mobile devices) that now has a world-leading position."