The share price of ASX meal kit delivery service Marley Spoon AG (ASX: MMM) jumped over 10% higher to $1.20 on Tuesday after the company reported that it had successfully completed a $16.6 million oversubscribed share placement.
The ASX small-cap has been one of the best shares to own during the coronavirus crisis with its share price soaring almost 400% higher in the space of just a couple of months. It is one of a small number of companies that have actually seen demand for their products and services surge during nationwide lockdowns.
Marley Spoon is a food delivery service with a global presence. Customers can select from a number of different meal options each week, and then the company delivers the fresh ingredients and recipes required to make them. Marley Spoon claims that their service reduces food waste and also promotes healthy eating. Ingredients are pre-portioned so that only the quantity required to make each recipe is included and there is no excess.
With restaurants closed and people urged to stay indoors as much as possible, Marley Spoon's meal kit deliveries are in high demand. They are more cost-effective than deliveries from restaurants, and they remove the need for extra trips to the supermarket. They also make sense as a meal solution for families who are spending much more time together indoors amid the social restrictions. Parents can teach their kids some cooking skills while ensuring they get a balanced diet.
In its recent quarterly update for the 3 months ending 31 March 2020, Marley Spoon reported a 46% increase in quarterly revenues over the prior corresponding period to a little over €42 million. Most of the surge in demand had occurred in just the last few weeks in the quarter, around the time many countries were implementing strict lockdowns.
And because Marley Spoon's meal kit deliveries are so well suited to the unique demands caused by the COVID-19 crisis, the recent influx of customers has come at much lower marketing costs, accelerating the company's path towards profitability. Whereas for the March quarter FY19 marketing expenses were equal to 41% of revenues, this time around they made up just 27% of revenues.
Image source: Getty Images
Should you invest in Marley Spoon?
The risk with Marley Spoon is that this surge in demand – and revenues – will be temporary. Once people are able to freely go outside and more small restaurants and cafes are able to open up again, customer numbers could plateau or decline. However, the path back to normality is still incredibly uncertain in most countries.
As we all collectively shift to a coronavirus-impacted economy, companies like Marley Spoon are uniquely positioned to meet these changing consumer demands.
Add it to the growing watchlist of previously under-the-radar companies like technology and telecommunications small-cap MNF Group Ltd (ASX: MNF) and software developer Objective Corporation Limited (ASX: OCL) that have the potential to thrive in this "new normal".
