27th July 2021
MADARA Cosmetics AS
In valuing the shares of MADARA, we are following two main valuation methods: 1) an income approach, based on the Discounted Cash Flow (‘DCF’) calculations and 2) a market approach, based on valuation multiples of a peer group of comparable listed companies. We have used the weighted average of values derived from the DCF and peer valuation, applying different weights to each method. Overall, based on our current projections for MADARA and other assumptions, we decided to slightly increase our fair value range (‘FVR’) for the stock from the previous EUR 8.60-9.40 to EUR 23.8026.30 per share.
Company Overview MADARA was established in 2006, aiming to create effective and innovative organic skincare products, which are sustainable, safe and completely natural, and draw on examples of the best practices. With this ambition, the Company has managed to develop a competitive brand within the organic skincare niche that is distributed through both conventional and speciality channels. The ‘MADARA’ brand became a local pioneer in the field of natural cosmetics. Each product is exclusively developed and manufactured in MADARA’s own laboratories and production facilities, enabling it to take 100% control over all processes. Organic ECOCERT certification, GMP and ISO standards, in vitro and in vivo researches emphasise MADARA’s passion for quality and perfection in every detail. The Company exports its own brand products worldwide as well as offers contract manufacturing services.
MADARA Cosmetics Group The MADARA Cosmetics group is made up of several companies. AS MADARA Cosmetics is the parent company responsible for the development, manufacturing, and sale of organic cosmetic products under two brands: ‘MADARA’ and ‘MOSSA’. MADARA Cosmetics has three fully owned subsidiaries: MADARA Retail SIA, Cosmetics NORD SIA, and MADARA Cosmetics GmbH. MADARA Retail SIA manages four MADARA brand stores in Riga, located in shopping centres – “Galerija Centrs”, “Spice”, “Alfa”, and “Akropole”. The newest store in “Akropole” was launched in April 2019. In 2020, the revenues of MADARA Retail SIA dropped 8.5% y-o-y to EUR 0.86m (accounting c.a. 20% of the Company’s total sales in Latvia), due to temporary store closures in Latvia because of the COVID-19 related restrictions imposed by the local government. Cosmetics NORD SIA is focused on rendering contract manufacturing services using the production infrastructure and capacity of MADARA, with sales amounting to EUR 0.3m in 2020, down 51% y-o-y, due to difficult circumstances related to the COVID-19 restrictions in the operation of several partners. However, the management claims that in response to the drop in turnover, Cosmetics NORD SIA developed a new contract strategy, which is actively implemented in 2021. MADARA Cosmetics GmbH provides cosmetics marketing services in Germany and organises the distribution of MADARA products in that market. Also, there is a 19% minority shareholding in SIA Farmācijas, biomedicīnas un medicīnas tehnoloģiju kompetences centrs. Both facilities have been formed within the framework of the state aid programme ‘Competence Centres’, being implemented with the help of the European Regional Development Fund. The main aim of the programme is to bring together companies and scientific institutions working in the same field as well as to encourage cooperation between the industry and academia to foster new methods and technologies.
Management The operational management of the Company is structured as a usual two-tier system, comprising a management board and a supervisory board. The management board is responsible for the day-
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INSTITUTIONAL EQUITIES
to-day management of the Company’s operations and is authorised to represent the Company based on the applicable laws and the Articles of Association. The supervisory board of the Company is the supervisory body representing the interests of the shareholders in general meetings and exercising oversight over the activities of the management board. Supervisory Board According to the Articles of Association, the supervisory board consists of five members who are appointed by the General Meeting for five years. Currently, the composition of the supervisory board is as follows: Anna Ramata-Stunda – Chairman of the supervisory board. Born in 1984. She graduated from the University of Latvia in 2008 with a master’s degree in life sciences and biology. Since 2010, she has worked as a researcher and lecturer at the University of Latvia, where she has participated in research projects for the Company. She is also a board member and co-founder of SIA InCell, which provides biotechnology and research services. Ms Ramata-Stunda is the co-author of many scientific publications, as well as holds several patents. Liene Drāzniece – Deputy Chairman of the supervisory board. Born in 1979. She graduated from the Latvian Academy of Art in 2003 with a bachelor’s degree in visual communication, specialising in the field of graphic design. In 2007, Ms Drāzniece graduated from the Istituto Marangoni Milano, Master Design Direction programme, where she studied brand strategy. Before co-founding MADARA, she worked in the international advertising agencies McCann, Leo Burnett, and Lowe as an Art Director for major Latvian brands, and she is the author of several brand identities for consumer goods and niche products. Since 2009, she has been the Art Director of the Company. In 2017, she also became a lecturer at the Riga School of Design and Art in the Department of Advertising Design. Edgars Pētersons – Member of the supervisory board. Born in 1981. He graduated from the Stockholm School of Economics in Riga in 2007 with a bachelor’s degree in economics and business administration. He is a founder and strategic planner of WKND, an advertising and strategic agency. He is also a founder and senior consultant of the company Pattern Consulting, a business consulting agency. Mr Pētersons has gained strong experience in strategic planning, branding, and marketing consulting areas. Sari Hannele Rosin – Member of the supervisory board. Born in 1972. She graduated from the South Carelian Business School in 1997 with a bachelor’s degree in business and economics. She is the CEO of Oy Transmeri Ab, a subsidiary of Oy Transmeri Group Ab and the market leader in Finland for many cosmetics categories, e.g. natural organic cosmetics. Oy Transmeri Group Ab is a strategic shareholder of MADARA with a 22.9% stake. She is also the CEO of Oy Sultrade Ltd, a sister company of Oy Transmeri Ab, importing, selling, and marketing well-known sports brands in Finland and the Baltics. Since April 2020, she is the Chairman of the board of the Finnish Cosmetic and Detergent Association. Anna Andersone – Member of the supervisory board. Born in 1981. She graduated from the Stockholm School of Economics in Riga in 2002 with a bachelor’s degree in business and economics, specialising in the fields of IT and marketing. Ms Andersone started her career in Marketing and Communications at McCann Riga and was promoted to a Project Director and Strategist (2003-2008), working with pan-Baltic campaigns. She gained international experience working in the UK and France. She is a co-founder of several start-up companies and holds management positions in numerous companies, including SIA HungryLab, SIA Froont, SIA Hello World, SIA One two free, and TechHub Riga foundation.
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