AlsterResearch AG Update: The Social Chain - A strong pride of Lions

The Social Chain AG (Update)   Media MCap EUR 444m   BUY (HOLD) PT EUR 134.00 (+17% potential)   A game changing acquisition. The Social Chain announced that it acquired 100% of DSH Holding GmbH - a company with c. EUR 270m in annual sales and acceess to more than 4,000 products. Read here why we believe that this is an ideal fit.   Read

What’s it all about?

The Social Chain (TSC) announced that it will acquire 100% of DS Holding GmbH. DS Group is an international brand and trading company. DSH is a specialist in the development, marketing, and distribution of currently more than 4,000 products in the consumer goods industry. TSC will finance the deal with new shares in the magnitude of 2.855m at yesterday’s closing price of EUR 42.50 per share (total volume share component EUR 120.5m) and a cash component of EUR 100m. Hence, TSC pays EUR 220.5m, for additional sales of EUR 270m (DSH’s expected sales in 2021) which presents an EV/sales multiple of 0.8x - clearly below TSC’s current valuation (EV/sales 4.1x). Hence, this deal looks value accretive in our view. Taking the new guidance and synergies into account, we raised our short and mid-term estimates as well as our price target from EUR 40.00 to EUR 54.00, yielding an upside of c. 30%. Up to BUY from Hold.