Yield management platform operator BigDish (DISH) has announced an extensive operational update covering recent trading. The main highlight is that since the last update in November, when there were 177 restaurants live on the BigDish platform, restaurant numbers have increased by 150% and by 120% in January alone. There are currently 351 restaurants live on the BigDish platform and an additional 91 restaurants that have agreed to join, taking the total to 442 (the target is seven days between agreement and being live). Also, there has been a 387% increase in deal quality (50% off and 2-4-1 offers) in the month of January compared to the whole of 2019 and a 34% increase in 7 day availability compared to 2019.

The recent successes follows the appointment of new CEO Tom Sumner at the end of last year and a focus on recruitment and setting up new systems and processes with a view to accelerate growth this year. The telesales team in Manchester team has increased in size and is expected to reach full capacity of ten persons over this first quarter.

The primary focus for the year is restaurant acquisition and accelerating the growth of restaurant numbers in order to build out a national product. On that note, success seen at the Wildwood Bournemouth site will now see the progression of the roll out to all 56 Wildwood and dim t restaurant brands (owned by Tasty Group plc) over the coming weeks.

As previously expected, BigDish said that the cost of the telesales operation is proving to be considerably less than the previously discontinued ‘boots on the ground’ strategy. As restaurant numbers increase in key towns and cities the focus of the strategy will then shift to consumer acquisition and further product development.

BigDish believes that building a national product with increasing restaurant numbers will enable it to use national brands for large-scale marketing partnerships in order to drive consumer acquisition, integral to the strategic marketing plan. Providing a potential additional revenue stream, It is expected that some of these deals will be monetised, with the sums involved possible more significant than future transactional revenue.

In other matters, the platform technology continues to be improved, including an overhaul of the app’s search functionality and improvements to the speed and user experience within the app on an ongoing basis. The team is also making improvements to the website layout and functionality and changes are being implemented that will enable consumers to make a booking up to 7 days in advance at all restaurants. 

BigDish will now provide more regular updates to investors, announcing restaurant numbers on the first business day of each month for the remainder of the year.  Finally, the company will continue to monitor its budget forecasts, which may result in extending the previously announced funding runway beyond Q3 2020. 

ASSESSMENT

Overall, a cracking start to 2020 for BigDish, which is delivering successfully on its newly focussed strategy announced at the end of last year. Restaurant numbers, which are the key driver of revenues, are rising rapidly, validating the decision to change to the more efficient telesales approach.

The shares have had an equally good start to 2020, rising from 1.25p at the beginning of January to the current 2.9p, to value the company at £10.1 million. With early stage technology companies it is difficult to accurately place a valuation on the shares given uncertainty surrounding future cashflows. However, there are plenty of transactions in the wider food technology industry which reflect the kind of valuation Big Dish could command should it continue to successfully execute its strategy.

To take one example, yield management and restaurant reservation platform Eatigo completed a Series B fundraise in October 2016 at which point it reportedly had grown to 700 partner restaurants, with media sources suggesting that c.$10 million was invested by travel and restaurant website owner TripAdvisor. Siddhanta Kothari, Chief Financial Officer of Eatigo, suggested the business had a valuation of $70 million following the funding round

We believe this valuation could be applied as a potential benchmark to BigDish as 700 restaurants look highly achievable in 2020, in our view, especially given the numbers announced in this update. At current exchange rates that equates to a valuation of c.£53 million, some 5 times the current market cap. This valuation disparity with some of its private peers also poses the scenario where the company could be used as a merger/reverse vehicle – something the market clearly has not ascribed any probability to at this price.

Big Dish has been very active on the newsflow front since its IPO in August 2018, with the market often reacting positively to good news. With a new CEO in place and focussed expansion strategy, we believe that 2020 could see the shares rise further if continued positive updates are made.

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