Mobile phone 'app' company ready to grow

By Graeme Dickson
Updated: 12:14 EDT, 15 December 2010

I would imagine that many readers of this column will own or know someone that uses an iPhone or Blackberry.

If that is you, then there is a good chance that you can identify with the fact that mobile phone applications (app), where third party software is downloaded directly onto the mobile phone, is set to soar over the next five years.

One company that looks poised to capitalise on this growth is the mobile web payments and analytics company Bango (BGO):

According to Juniper and Rutberg & Company, the mobile app market is expected to grow from $10 billion (£6.3 billion) in 2010 to $32 billion (£19 billion) in 2015 with app downloads rising from 2.6 billion in 2009 to 25 billion in 2015.

Bango signed an exclusive contract with Blackberry owners Research in Motion (RIM) to facilitate carrier transactions involving Blackberry's AppWorld.

This means that when you buy and download an app on Blackberry's AppWorld, instead of having to dig out your credit card details and punch it into the phone, the cost of the download is simply added to your mobile phone bill at the end of the month.

Bango takes a small cut of the end-user revenues generated and a monthly operating fee along with fees allowing the integration of Bango's software into the mobile operator's software that enable payments on the Blackberry AppWorld.

Deployment has already started: in August America's AT&T went live using Bango's software with the intention of rolling it out globally.

Bango also receives revenues from extensive analysis and anti-fraud tools to App Store operators and has already signed-up well known names such as EA and Gameloft.

Just under a week ago the company announced it was to place almost 1.8 million shares at 135p to raise £2.4 million to meet the demand from new institutional investors, helping the company to strengthen its balance sheet and support discussions with other leaders involved in the mobile phone industry.

The company trades on a forecast 2012 price to earnings ratio of 12.8, which for a technology company in a fast growing market, looks too cheap.

The new shares will come live tomorrow and if one can allow a few weeks to absorb any overhang from flippers (those that just buy in the placing and sell within a day or two of the placing announcement for a quick profit) the shares should do very well.

Update

Edenville (EDL) – Suggested to buy at 1.195p, albeit there was an uplift in the share price by the time the report came out. Since then the shares have settled at 1.4p. Keep holding for drilling news albeit I would have thought it is unlikely that the company will announce anything in the run up to Christmas and the New Year.

Weatherly International (WTI) – Suggested to buy last week at 8.1p, the shares have come off the boil a bit, closing yesterday at 9.325p. The company yesterday sadi it was still on track to commence production in the first quarter of next year, with 4,500-5,000 tonnes produced in 2011, 7,000 thereafter with an objective of reaching annual production of 20,000 tonnes per annum. Keep holding.

Chaarat Gold (CGH) – Suggested to buy at 51.5p, the shares closed yesterday at 72.5p. The price of gold is certainly helping the performance and the shares are now trading in 'blue-sky' territory. Keep holding for now.

Geiger Counter (GCL) – Suggested to buy at 85p, the shares closed yesterday at 102.5p. Keep holding for now but hopefully we will see this share trading at 120p in the near future. Raise the stop to 93p.

Avanti Communications (AVN) – Suggested to buy at 655p, the shares closed yesterday at 712p, despite several contract wins. Keep the faith but also keep the stop at 675p.

Avon Rubber (AVON) – Tipped as a buy at 161.5p, the stock closed yesterday at 211.5p. This is performing to plan and one would expect resistance at 240p in the short-term. Keep the stop to 200p.

Toumaz Holdings (TMZ) – Tipped as a buy at 8.625p, the stock has slipped to 6.875p. The company will likely be required to raise cash at some stage within the next six months. The prospects are very exciting so keep holding for now.

Renewable Energy Holdings (REH) – Tipped as a buy idea at 16.25p, it closed yesterday at 15.75p. Yesterday's net asset value equated to 35.5p a share, still too big a gap to ignore.

Bowleven – Tipped as a buy at 177.25p, the stock closed at 359.5p yesterday, a 102.8 per cent gain. The company is likely to release news regarding current drilling before Christmas. De-risk and sell your original investment capital and leave the profit element to run for hopeful further upside gains.

IQE – Tipped at 24.25p, the stock closed yesterday at 47.25p, a 94.8per cent gain. Keep holding for now but keep the stop at 43.5p.

Tissue Regenix – Suggested as a buy at 16p, the stock has slumped to 10.5p. Keep holding despite the disappointing performance.

The material for this report comes from Alpha Termina and Bango's interim results presentation. The writer does not hold any shares or derivatives in the above mentioned companies except Renewable Energy Holdings and Weatherly International. Some clients of Optiva Securities hold shares in the above mentioned companies.