SRH AlsterResearch AG Update: Social Chain AG - Transaction announced

The Social Chain AG (Update), E-Commerce & Media
MCap EUR 279m; BUY, PT EUR 37.00 (upside 47%)

Transaction announced – BUY reiterated Successful M&A transaction confirms investment case As an integrated social media company, the core competence of The Social Chain is the development and marketing of social media brands and the associated products. Therefore, the company achieved an additional milestone in its growth strategy by the closing/ announcement of a further M&A transaction. Expansion of Food activities with plant-based meat alternative In addition to the expansion of the brand portfolio with ‘PLANTY-OF-MEAT’, a totally new product category (meat substitute) was entered. The Social Chain concentrates on products to address current customer issues and trends, especially sustainability topics such as organic products, sustainable production processes or physical wellbeing through healthy food and nutrition. PLANT-OF-MEAT was founded in 2019 and is perceived to be a specialist in the production of meat alternatives using sunflower as a natural source of protein. Hence, this acquisition fits perfectly into the existing product portfolio and should offer a wide range of synergies. Even if the impact on figures and estimates is limited for the time being, as just a 10% stake was acquired, The Social Chain secured options to acquire a majority at a later stage. Food activities expected to grow organically by almost 50% in 2021 Since November 2020, The Social Chain pools all of its food activities in its subsidiary Food Chain as part of the Social Commerce segment. Today, the company provided more insight, as organic revenue growth of Food is now expected to stand at c. 46% in 2021. Revenues of EUR 110m are guided for the current year, which compares with EUR 75m (EUR 70m ARe) in 2020, according to preliminary figures and pro forma consolidation. Backed by its promising growth strategy, The Social Chain offers the potential to further participate in the trend towards e-commerce. Significant top-line growth and a successive EBITDA margin expansion are expected. Hence, we reiterate our BUY recommendation and an unchanged price target of EUR 37.00