Skin Elements Ltd (ASX:SKN) is focused on the development of natural and organic skin care products.
The company is currently trading at $0.17, with Perth firm Gloucester and Portman Capital applying a Speculative Buy rating with a target of up to $0.73 as it implements a growth strategy.
The following is an extract from the report.
Company summary
Skin Elements Limited is an Australian owned and operated skin care company focused on the development, manufacture and sales of the natural skin care products - including Soléo Organics Sunscreen, Elizabeth Jane Natural Cosmetics, Elizabeth Jane Natural Anti-Aging Creams and recently acquired McArthur Organic Pawpaw Skin Care product ranges.
Positive developments so far this year
- Appointed leading Australian laboratory Baxter Laboratories Pty Ltd as its preferred Manufacturing Partner for Skin Elements’ range of natural and organic skin care;
- Completion of acquisition of McArthur Skincare, a leading Australian natural skin care business;
- Baxter Laboratories, the Company’s preferred manufacturing partner, delivered a 10,000 tube production run of the Soléo Organics sunscreen for orders from Japan and Slovenia;
- New sales in the quarter included the US market and Hong Kong, plus Australia via distributors and direct online sales; and
- Corporate and operational head office was expanded to provide an enhanced corporate environment for a larger personnel team post the McArthur Skincare acquisition.
Investment highlights
- Marketing programs and plans for product range expansion are ongoing;
- Potential to expand in new markets and penetrate further in the existing markets;
- McArthur Skincare’s acquisition gives it a ready market and distribution channels;
- Growing market for SKN’s product; and
- Baxter’s expertise in the sunscreen sector is of key benefit to Skin Element.
Our view
We reiterate our speculative Buy recommendation for SKN with a target price range over the next 12 to 18 months of up to $0.73.
We find the current price level attractive and recommend therefore that investors with a higher risk profile consider including SKN in their portfolio.
The share price does not reflect that SKN is a company that is growing, improving and expanding.
The company has demonstrated the ability to implement its growth strategy which includes the expansion of their Skin Care product range with cash flows and future profits, upgrading and expansion of the existing business through acquisition of new skin care businesses, and sealed further acquisitions.
The company also strengthened the management team, enhanced industrial relations and started capital market activities.
The SKN share price is currently trading at an estimated 2017 P/E of 3.89x and an estimated P/E RATE of 6.80x expected in FY18 with a forecast Target price range of AU$0.65 to $0.73, over the next 12 to 18 months.
We initiate with a Speculative Buy recommendation, offering a price triggers in the short term could be the completion of the companies future acquisitions and a possible contract with a major distributor in Asia and China, which may result in a significant increase in sales and revenues, due to the possible large market share out of Asia/China, with a better-than expected full year results for 2018.
Further increased investor awareness of SKN with release of new organic/natural Skin Care Ranges and future possible acquisitions of other similar organic/natural brands.