Small Caps | Oct 04 2017
Moelis initiates coverage on Big Un, which provides digital video production and related online digital search services to business customers.
-Automatic tailoring of video content at lower cost vs traditional production
-Moelis envisages strong opportunity in highly fragmented video production sector
By Eva Brocklehurst
The use of video, as opposed to text and images, for companies to market their products and services highlights the potential of Big Un Ltd ((BIG)). Moelis suggests consumers will also, in turn, be able to seek small-medium enterprises and provide reviews on these businesses by recording a video through the smart phone application and uploading it to the Big Un platform.
Big Un provides digital video production and related online digital search services to its business customers in Australasia, North America, UK and Asia. Moelis initiates coverage on the stock with a Buy rating and $2.10 target.
The company's intellectual property allows for the automatic creation of tailored short-form video content, using its large and growing video content library. This enables the company to sell high-quality professional video at a fraction of the cost of traditional production.
Moelis notes small-medium enterprises have traditionally considered video production too costly, despite enhanced customer engagement and positive return on investment. Big Un can offer high-quality video production for less than $4,000 or a suite of videos for $7-12,000.
Around 40% of the world's population now use a social media platform and video is becoming a part of the consumers internet experience. Moelis notes that by 2021 global video traffic is expected to comprise 82% of all consumer internet traffic. The broker expects strong sales growth through FY18 with growth in recurring revenue streams from increased paying video subscribers and increase contribution from brand sponsorship.
As of June 30, 2017 the company had converted around 3,800 paying subscribers from its member pipeline with an average revenue per user (ARPU) of around $7,400 and an annual contract value of $28.1m.
Moelis takes this revenue per user as a base in FY18 and then anticipates ARPU to decline towards around $4,000 by FY23, as entry-level video production/content subscription becomes a greater proportion of the overall pricing mix. Customers are primarily acquired through telemarketing. Current members stand at 127,000 following recent acquisitions.
The business has three segments. Video subscription involves the production of high-quality video marketing content for SMEs and licensing it to them for marketing on their websites and social media channels as well as the Big Un platform.
The second segment involves the company's video content being re-purposed for the production of online TV shows that are suitable for licensing to third parties and/or sponsorship by large brands. Thirdly, a video review platform allows consumers to search and view video reviews of businesses, products and events as well as produce their own reviews and upload automatically.
Moelis notes the video production sector is highly fragmented, with many small private players and creative individuals offering services. This underscores the key risks such as technological competition, customer retention and intellectual property protections.
The company intends to accelerate customer acquisition domestically in partnership with strategic organisations as well as expand internationally. The company was founded in 2013 as Big Review, with a vision of creating a video-based review platform for Australian SMEs. The company listed on ASX via a reverse takeover in December 2014. Big Un recently acquired BHA Media and the hospitality vertical from The Intermedia Group.
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