VSA Capital Market Movers – Samarkand Group


Samarkand Group plc (SMK) has announced the signing of an announcement to acquire Napiers the Herbalists (“Napiers”). The company was founded in 1860 by renowned herbalist Duncan Napier in Edinburgh. Napiers is an iconic Scottish brand that still operates from its original apothecary in Bristo Place and its Napiers.net website.

VSA Morning Technology Commentary, 11/02/21

Samarkand (Samarkand Group PLC (AQSE: SMK))

Samarkand – Brand acquisition in UK

Samarkand Group PLC (AQSE: SMK) (SMK) has announced the signing of an announcement to acquire Napiers the Herbalists (“Napiers”). The company was founded in 1860 by renowned herbalist Duncan Napier in Edinburgh. Napiers is an iconic Scottish brand that still operates from its original apothecary in Bristo Place and its Napiers.net website. The brand has a heritage; for over 160 years, it has been offering its customers food supplements, herbal remedies, care and wellness products.

SMK is a UK-based e-commerce technology and retail group focused on connecting international brands with China, the world’s largest e-commerce marketplace. The Group has developed a proprietary software platform, the Nomad platform, which is integrated with all the touchpoints necessary for e-commerce in China, including e-commerce platforms, payments, logistics, social media and customs.

Napiers is expanding internationally, most recently supplying consumers in Asian markets through its partnership with a leading Korean skin care brand and its work with SMK as a distributor. SMK has had a commercial relationship with Napiers for over 3 years.

The combined assets of Napiers generated revenue of £ 1million in the year ended March 31, 2021 and EBITDA of £ 0.24million on an unaudited basis. We see the newly acquired company supporting our forecast for SMK.

The acquisition of Napiers includes: An initial consideration of £ 1.7 million in cash on a cash basis; a deferred consideration of £ 0.1 million in cash payable between 6 and 9 months after the completion date; and contingent consideration of up to $ 0.7k payable on certain post-acquisition events which will be settled either in cash or through the issuance of new common shares, at SMK’s discretion.

The growth follows the March IPO in which £ 17million was raised as the deal increased in size allowing such acquisitions combined with the strategic placement of £ 3.1million. pounds sterling by Chinese logistics giant SF Holdings (SF Express). SMK intends to expand Napiers’ products and services into its home market in the UK and internationally in China and beyond. Samarkand has already acquired the wellness brands Probio7, Zita West Products and Baba West. The group has invested in brand marketing and using SMK’s Nomad cross-border e-commerce software platform and supply chains, has extended its reach into the market in Asia and beyond.

SMK was founded in 2016 and is headquartered in London, with offices in Shanghai and Tokyo employing over 140 people. The stated goal of the IPO was to expand geographically, including access to Northeast Asian-based brands looking to accelerate the growth of e-commerce in China.

In October 2021, the Group announced that it had signed an agreement for the use of its Nomad Checkout cross-border e-commerce software platform with Amorepacific in South Korea, one of the largest cosmetics companies in the world and listed on the Korea Stock Exchange with a current market capitalization of over £ 7 billion.

Amorepacific operates more than 30 beauty and personal care brands popular with Chinese consumers and achieved annual revenues of over £ 2.7 billion last year, of which around 20% was for its Chinese consumer base.

SMK is growing rapidly: In the year ending March 2021, orders processed for consumers in China increased 107% to 122,000 (2020: 59,000). The number of product lines processed on the Nomad platform in 2021 was 2,111 (2020: 381).

With respect to SMK, for fiscal years 2022, 2023 and 2024, our new forecast calls for underlying revenue growth year-on-year of 52%, 74% and 53%, respectively, to produce revenue of 22.6 million. of pounds sterling, 39.3 million pounds sterling and 56.3 million pounds sterling. Investing in growth after the IPO results in an EBITDA loss in FY 2022 of £ 2.3million. For FY2023 we expect EBITDA of £ 4.0million and a 10% margin and given the strong revenue growth and high operating leverage of the model, for FY2024 we expect an EBITDA of £ 10.1 million and a margin of 18%.

Our assessment, to set a 12-month price target, is based on a mix of three assessment methods, the EV / Sum of Parts (SOTP) assessment and an EV / EBITDA and a DCF. . Our Sum of The Parts valuation sets a valuation of £ 124.7million, a consolidated EV / EBITDA based on our fiscal year 2024 when earnings growth really kicks in, sets a valuation of £ 140.9million and our DCF , based on explicit cash flow forecasts, yields a valuation of £ 189.1m. We value, on a blended basis, Samarkand at EV of £ 166.6million and market cap of £ 178.4million (taking into account net cash of £ 11.8million at end March 2021 ).

We reiterate our buy recommendation and our price target of 326 pence.

#Indicates the stock of the VSA house.
All disclosures and supporting graphics can be found in the PDF version.

Phil Smith, Research Director, Technology | T: +44 (0) 20 3617 5187 | E: [email protected]

VSA capital research | T: +44 (0) 20 3005 5000 | E: [email protected]

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