Samarkand Group: VSA Capital
Group to Focus on Skincare and Wellness Brand Growth in Europe
Samarkand Group plc (SMK ASE) has announced the disposal of its Probio7 health supplements business for £1.1m in cash and future consideration of £0.2m. This strengthens the Group’s balance sheet, further reduces exposure to China and enables SMK to focus on selling wholly owned skincare and wellness brands in Europe. The business is in turnaround and a May 2024 trading update reported FY 2024 (to March end 2024) EBITDA losses reduced by 55% on FY 2023; this in line with prior guidance of £0.9m. SMK is successfully moving into profit and previously reported that Q4 2024 was close to adjusted EBITDA breakeven. Our FY 2025 forecasts, following the trading update, were for an adjusted EBITDA profit of £1.2m which included a £0.3m adjusted EBITDA contribution from newly acquired Optimised Energetics Ltd. We understand from SMK management that the Probio7 disposal reduces the adjusted EBITDA by £0.4m, and we have therefore revised our FY 2025 adjusted EBITDA to £0.8m. However, more importantly, the disposal of Probio7 brings in cash for expansion, reduces exposure to weak China markets and enables a focus on the Groups’ higher value, high growth skincare brands in Europe.
Recent Acquisition Brought in Skincare Manufacture
The May 2024 acquisition of Optimised Energetics Ltd brought in natural health and healing brands, Nature’s Greatest Secret and BeNatural. Optimised Energetics Ltd also manufactures premium skincare on a contract basis, including for SMK brands. For its own brands, the Group invests in new product development and packaging, and utilises its eCommerce technology to grow revenues and margins. The newly acquired Optimised Energetics Ltd manufacturing capability brings further opportunity to expand margins and market reach.
Recommendation & Target Price
The recent acquisition of Optimised Energetics, followed by the disposal of Probio7, positions the Group with a portfolio of high growth, high potential brands backed by cash resource to accelerate revenue and drive future profitability. The Group’s expanding margins and increasing profit offers significant upside to the current price.
We reiterate our Buy recommendation. 12-month target price £0.81/sh. (was £0.95p/sh.)
Read or download the full report here....
Disclaimer & Declaration of Interest
The information, investment views and recommendations in this article are provided for general information purposes only. Nothing in this article should be construed as a solicitation to buy or sell any financial product relating to any companies under discussion or to engage in or refrain from doing so or engaging in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the writer but no responsibility is accepted for actions based on such opinions or comments. Vox Markets may receive payment from companies mentioned for enhanced profiling or publication presence. The writer may or may not hold investments in the companies under discussion.