Bango

HOLD

07/12/2010 Ben Jaglom

Mobile payments specialist Bango widened losses for the six months to September though a deal with Blackberry maker RIM has brightened its prospects.

The AIM-quoted company unveiled losses of £460,000 (2009: loss of £240,000) as sales slipped 13.9% to £10.6m. The results follow an October trading update in which Bango warned that agreements with existing customers for a migration to Bango’s billing platform were ‘taking longer than expected to finalise’.

CEO and Bango co-founder Ray Anderson told Growth Company Investor about the win with RIM, which will see Bango handling all the payments on Blackberry’s App World. Anderson argued that with Apple’s App Store generating $250m last year, RIM’s application store ‘has the opportunity to generate significant revenues’ noting that Bango receive a small share of every transaction taken on the App World.

Looking forward, Anderson sees big opportunities from tablet computers such as the iPad, as well as its ability to work with a number of different phone and games companies, with Bango already handling all the payments for Japanese video games developer Capcom, the company behind the legendary Street Fighter series of games.

For the year to March 2011, analysts at house broker Cenkos see pre-tax profits of £200,000 (2010: loss of £300,000) on top line growth up £1.4m to £27.5m. This leaves the shares trading at a lofty 102 times forecast earnings.

Last recommended by Growth Company Investor at 90.5p the shares have gained 46% since and are now trading at 132.5p. Despite the worrying trading update in October that caused a number of shareholders to sell holdings, we think the Cambridge-headquartered outfit has further potential to grow through the burgeoning smartphone market and numerous opportunities in the tablet computer sector. As a result we recommend holding on to the shares for the time being.