Small Cap Value Report (Mon 30 Dec 2019) - DISH

30th Dec '19 by Paul Scott

30 comments 6817 reads

Good morning, it's Paul here.

Given that markets are quiet, I'll be approaching things in a leisurely fashion today, so estimated time of completion is 17:00. Sorry, that didn't work out as planned. Let's try again.

I see that the retired head of Next, Sir David Jones, has died. It's not for me to cast judgement on his career, other than to say that his autobiography is a fascinating read, very highly recommended. It details not only the turnaround of Next, when it had came close to going bust. More memorably, the book explains his battle to continue his business career, whilst suffering from Parkinson's Disease, it's quite astonishing the adversity that he overcame.

BigDish (LON:DISH)

Share price: 1.23p
No. shares: 349.0m
Market cap: £4.3m

(at the time of writing, I hold a long position in this share)

Half year report

We can't go into a new decade with a backlog of things for me to write about, so I'll get this section finished (am writing this on new year's eve, evening).

BigDish Plc (LON: DISH), a food technology company that operates a yield management platform for restaurants, is pleased to announce its half-yearly report for the period ended 30 September 2019.

Background - I came across this company in early 2019. It floated, with a full listing (i.e. not AIM listing) in Aug 2018, at 5p per share, then steadily drifted down. The concept is that it's a dining app, which enables restaurants to offer highly targeted discounts, at times of day when they would normally be empty or almost empty. Restaurants have to offer 50% and 25% off discounts on all food, but require customers to pay full price for drinks. Unlike almost other dining discount schemes, BigDish is free for customers, and enables restaurants to precisely control, in real time, what offers, and how many covers can claim the offers. When they're gone, they're gone.

I thought to myself, this sounds an interesting concept, I'll read the admission document on lazy Sunday afternoon. The app was operating in Bournemouth, and coincidentally I had moved to Bournemouth in 2017, so decided to download the all, and try it out.

I found the app absolutely brilliant. There were about 50 decent quality restaurants set up on the site, and using the app achieved superb discounts, on good food. I liked it so much,…

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sharw

30th Dec '19

Paul - another general request as it is a quiet day - would you like to tell us what weighting, if any, you put on brokers' target prices.

What prompts this is the rather miserly premium placed on Nasstar (LON:NASA) as mentioned above. finnCap advised the directors that 12.88p was fair and reasonable even if their TP was 15p.

The other prompt is that in my end of year musing I have done a simple screen for % price change 1 year greater than or equal to 100. It produces 78 companies including my 'one that got away' - SDI (LON:SDI) Several times this year I almost bought but didn't because it looked fully valued and this view was helped by finnCap's TP being around the actual price. The TP has been moved up but even today it is 75p with actual 78p (I could - and in retrospect should - have bought at 35p at the beginning of the year).

cic

Laughton, you comment "..so obviously they are in the early stages of building a business..", but it could also be a fraud, or if not, a deception! Look back at what the company issued as news in the past and compare with what has happened subsequently. Did the directors lie in a statement? Make your own mind up, but for me they are uninvestable.

Remember two things about about auditors: 1) They are appointed and potentially dismissed by the directors, not the shareholders. Their duty is to directors - a clear systemic conflict of interest. If there is a horrendous stench associated with a company they will probably give some adverse comment to save skin if things really go pear shaped, but just a bit of a pong - nah, risk/reward is in favour of them overlooking it, or accepting any semi-plausible excuse from the management. 2) The going concern statement simply means that there is a reasonable prospect that they will have enough cash to pay the bills for the near future; it says nothing about where that cash will come from. If the directors say to auditors "Our stockbrokers are putting together a plan for a new share issue and they are indicating to us that there is a lot of interest, and it should do well", the auditors will be happy to give the statement. Of course, a more truthful statement might have been "we have been ramping the shares and our stockbrokers think that they have enough mug-punters showing interest to be sure of getting the placing away", but the auditors may have had a bit of a problem with that. Most, I suspect would simply have said "Hmmm! I don;t think I quite heard that correctly. I suggest you rephrase it a bit more positively - then we can sign if off!"

Whitbourne

Hello cic,

Re. auditors you said:

Their duty is to directors - a clear systemic conflict of interest

Presumably you meant to the shareholders - the members of the company? The auditors address their audit report to them. The auditors are chosen in practice by the directors although the appointment is confirmed by the members at the next AGM. I agree with you, this is a systemic conflict that has not yet been fully addressed. This is very much a live topic in government circles and in March a new regulator was announced to address this and other concerns.

FREng

Hussman Funds' end of rear update is a useful reality check:

January 2020

The Nifty Fifty appeared to rise up from the ocean; it was as though all of the U.S. but Nebraska had sunk into the sea. The two-tier market really consisted of one tier and a lot of rubble down below. What held the Nifty Fifty up? The same thing that held up tulip-bulb prices long ago in Holland – popular delusions and the madness of crowds. The delusion was that these companies were so good that it didn’t matter what you paid for them; their inexorable growth would bail you out.

– Forbes Magazine, 1977, The Nifty Fifty Revisited

Blue Chip Performance: 1973-1974
Du Pont -58.4%
Eastman Kodak -62.1%
Exxon -46.9%
Ford Motor -64.8%
General Electric -60.5%
General Motors -71.2%
Goodyear -63.0%
IBM -58.8%
McDonalds -72.4%
Mobil -59.8%
Motorola -54.3%
PepsiCo -67.0%
Philip Morris -50.3%
Polaroid -90.2%
Sears -66.2%
Sony -80.9%
Westinghouse -83.1%

We forget. The same collapse happened in 2000 - 2002 and in 2007/8 ...

Richard Goodwin

if I had my cynical hat on it would strike me that for £NASA " will not support "an increased focus on growth on a longer-term basis" is code for making (possibly increasing) losses in the short term.

If so then the stock ranks are a v good example of systems which militate against funding these types of businesses. All of the current stock market wisdom is around quality so these early stage companies don't get a look in.

simoan

Paul - another general request as it is a quiet day - would you like to tell us what weighting, if any, you put on brokers' target prices.

I can't speak for Paul but broker target prices are worse than useless. Don't take my word for it though, studies by people far cleverer than me have shown them to be so inaccurate that they are totally worthless. The reason I say they are worse than useless is that any kind of target price engenders anchoring which is very possibly the most dangerous behavioural bias for an investor. I wish Stockopedia would remove it from the StockReport.

All the best, Si

Jeffvshepherd

upgrades/downgrades are worth looking at in my opinion just to gauge sentiment.

Lord Gnome

Nothing to do with today's SCVR, but could we please have an easy to spot link from the home page to the share picking competition? TIA.

Rusty2

There is some speculation that brokers downgrade or upgrade shares to move the price in the direction they want, I have bought shares which fell around 8%, just because of a broker downgrade then shot up the next day. I think most of them are pretty useless apart from giving opportunities to buy and sell.

I think you'll find that in reality any broker forecast is no better than tossing a coin. Again, studies have been performed that prove this to be the case. There's a good section in the James Montier "Little Book..." on this very topic.

Thornabian

I've personally seen how broker targets are gauged at probably the market leader and the usual approach is if a share is put on a focus list then the price target will be based on a really detailed analysis including discounted cashflows and economic value adjustments across all FS.

If a company isn't on the focus list, this isn't done and it is generally a bit of a finger in the air exercise. I will caveat this by saying some brokers have specialisation so it isn't a criticism of them but rather a reality that they cannot cover everything.

bottomoftheheap

End of rear? (but I do know what you mean).

Could I wish all of you , especially Paul and Graham the best seasons greetings and a Happy, Prosperous New Year..

James Weston

I think he's in the pub!!

Cleeve

Does anyone know including Paul himself under this new format how I can find Beam me Up Scotty as I can't see it anymore. My tip for the year is Asimilar which I am very long of time will tell

MichaelFBS

“I wish Stockopedia would remove it from the StockReport.”

Could not agree more.

davidhowman

31st Dec '19

If the article appeared I could comment on it but where is it ?

AnonymousUser192020

https://www.stockopedia.com/fantasy-funds/beam-me-up-scotty-4990/

David Hull

With all respect, you don’t seem to have learnt from previous errors. There’s a popular saying ‘*its like trying to catch a falling knife’ ,well this ones more like ‘trying to catch an exploding HAND GRENADE,

Sorry i\t’s my first ever post!

Miguel Martins

24th Feb '20

ben316

22nd Jun '20

It's pretty much Pre-revenue Laughton, so can't really value it like a traditional business.

IMO if they can scale and execute the technology it could do really well.

Small Cap Value Report (Mon 30 Dec 2019) - DISH

BigDish (LON:DISH)

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Paul Scott

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