Pitt Street Research sees Skin Elements as severely undervalued

Growth in Skin Elements’ organic skincare and cosmetic products, as well as Covid-19 sanitizers and sanitizers, is expected to outpace market pricing, according to Pitt Street Research.

Pitt Street Research has released a report on the share price of Australian natural health companies Skin Elements Limited (ASX: SKN) Undervalued considering its unique positioning and expected growth in its target market.

SKN’s goal with natural antimicrobials is to create organic products that surpass their chemical alternatives.

Founded in 2005 and headquartered in Perth, SKN focuses on developing natural and organic products that perform better and last longer than their chemical counterparts.

The company has four main product lines. It sells all natural sunscreen products under the Soléo Organics brand, therapeutic papaya skin care products under the PapayaActivs brand and cosmetic skin care products under the Elizabeth Jane brand.

SKN has recently developed the InvisiShield SuprCuvr brand of plant-based hospital grade disinfectant which has been found to be effective against Covid-19 and is listed on the Australian Register of Therapeutic Goods (ARTG).

Image: Skin Elements

Undervalued – at least 21 cents reserve and 40 cents optimism

Pitt Street sees SKN, currently valued at 2.8 cents, bearing the brunt of a bearish sell-off in growth stocks during 2022’s global market volatility.

“We use the DCF methodology to value the company at 21 cents per share, with an optimistic scenario of 40 cents per share, and make reasonable assumptions about the growth of its existing skincare product line and the recently launched InvisiShield product line,” the report said. .”

growing market

SKN operates in a rapidly growing market. Consumers are becoming more health conscious and prefer natural alternatives to chemical products.

Organic and natural products are seen as key drivers for the cosmetics market in the coming years.

The global natural and organic cosmetics and personal care market is expected to grow from approximately $38 billion in 2020 to approximately $55 billion in 2027, according to a Pitt Street research report.

Global market value of natural and organic cosmetics and personal care (US$ billion)

Source: Statista


All SKN products are based on naturopathic principles, using only organic and natural ingredients.

From non-whitening (micronized) zinc to phyto-fortified extracts with antioxidants, SKN has spent over 15 years and $35 million developing its formulas and products.

SKN’s Solèo Organics and PapayaActivs products have FDA, TGA and other international approvals.

The company also regularly partners with other natural product companies to enhance its organic product line.

In 2017, SKN acquired McArthur Skincare and in 2018 entered into a memorandum of understanding with Affinity Energy and Health Ltd to develop a range of new skincare products based on algae and cannabidiol (CBD).

SKN’s products are present in key markets in the Americas, Europe and Asia. The company operates in 16 countries around the world.

Pitt Street believes SKN is well-funded to continue supporting its R&D and mass-market products, raising more than $24 million in equity financing in 2021.

With SuprCuvr gaining TGA approval and SKN now funding further growth, management plans to expand further into international markets.

Capitalizing on the Disinfectants and Disinfectants Market

In 2020, with the outbreak of the Covid-19 pandemic, SKN’s management decided to adjust its strategy and enter the disinfectant and disinfectant market.

SKN has used its expertise in advanced organic antibacterial formulations to develop a range of natural and alcohol-free hand sanitizers.

It launched InvisiShield Natural hand sanitizer in April 2020, which has been shown to be 99.99% effective against the coronavirus.

The sanitizer is made from organic plant extracts, including lemongrass, sage, and thyme, combined with natural antimicrobial compounds. The company later developed SuprCuvr.

The global preservatives and disinfectants market was valued at USD 24 billion in 2020 and the market is expected to grow at a CAGR of 18% from 2021 to 2028.

In addition to Covid-19, the occurrence of diseases such as cholera, typhoid, hepatitis A and dengue due to lack of cleaning is expected to support demand for sanitizers and disinfectants, Pitt Street said.

Global Antiseptics and Disinfectants Market Size (USD Billion)

Source: Grand View Research

The stock analysis firm said SKN is well-positioned to benefit from the fast-growing market for sanitizers and disinfectants. SuprCuvr is the world’s first and only approved disinfectant that reduces Covid-19 coronavirus by 7 log (99.99999%) on surfaces.

SuprCuvr’s TGA registration opens new doors for companies as venues such as hospitals and aged care facilities must use only TGA-registered disinfectants in their cleaning protocols.

Pitt Street has a distribution agreement with medical distributor Pacific Healthcare and expects many commercial sales agreements, not only in healthcare but also in government, hotels, offices, airports, public transport hubs and even private residences.

strong leadership team

Pitt Street also emphasized that the company’s experienced leadership is an asset to the company, and the board members have an excellent past track record.

Executive Chairman and Chief Executive Officer Peter Malone has over 30 years of experience in the global financial markets.

In the past, he has raised over $150 million for innovative technology development projects.

Must utilize SuprCuvr

In its valuation of Skin Elements, Pitt Street said it factored in revenue growth from SKN’s existing skincare line, which recently launched the SuprCurv line.

In its forecast, Pitt Street assumes that SuprCuvr’s commercial-scale contracts and the average value of such contracts will steadily increase and contribute more through 2031.

“At the time, we modeled revenue of between A$180 million and A$300 million for the entire InvisiShield SuprCuvr product range,” the report said.

However, it said the company needs to execute well to get the most out of SuprCuvr.

“It is clear that Skin Elements is not a leader in disinfection such as SC Johnson, Reckitt Benckiser, Procter & Gamble, 3M or Clorox,” the report said.

“We believe that the lion’s share of the market will remain in the hands of such companies. However, there is a lot of room for emerging players who understand the new demands of the market, such as Skin Elements.”

This article was developed in partnership with Skin Elements, the Stockhead advertiser at the time of publication.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

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