Skincare products are big business and AQSE-listed Incanthera [AQSE:INC] seems to be tapping into that demand effectively. Shares in the company are now up from 6.5p a year ago to close at 29.5p on AQSE on Friday.
Progress is driving considerable investor interest in the company. Incanthera is poised to begin distribution of its flagship Skin+CELL product in both Switzerland and Austria this September, following a tie up with distributor Marionnaud.
But the opportunity goes beyond these countries, with Marionnaud planning to roll Skin+CELL out to other European markets in the near future. The initial production order of 25,000 units has been increased to 50,000 and then doubled again to 100,000.
This month Incanthera confirmed yet another production update, for 250,000 units. This would be to fulfil growing European launch demand. The total placed order is now for 350,000 units.
What is Skin+CELL?
Skin+CELL delivers bioactive B3 agents below the upper skin layers to help repair skin that is suffering from ageing/sun damage. The product is sold to retail in five formats, namely face, hand, body, serum and eye cream.
Incanthera said this month that the essential infrastructure and framework that the team outlined for the commercial deal announcement in December 2023 is now in full operation; the company is ramping up the production orders and preparing for launch.
Further rollouts are being planned across Asia. These are considered ideal markets for Incanthera’s products given the consumer focus on skin-health and beauty and Marionnaud parent A.S. Watson’s sheer dominance in these retail markets.
The real opportunity for Incanthera
Which brings us to the real opportunity here for Incanthera: the Watson Health & Beauty retail empire. Success with Marionnaud could lead in turn to further distribution across the A.S. Watson retail cosmetics network globally. It’s exciting stuff for a company with a market cap still under GBP 40m.
Incanthera is working with Swiss group Frike Cosmetic AG for manufacturing and distribution. Marionnaud will determine the retail pricing structure. According to analysts at Stanford Capital Partners, production is largely self-funding with Frike collecting a 76% gross margin contribution.
Stanford sees Incanthera as having a highly scalable business model thanks to its outsourced manufacturing arrangements and massive distribution opportunity presented by A.S. Watson. Stanford forecasts EBIT margin expansion post FY 25 at circa 26% as volume shipments and sales grow, but overheads remain low.
Underlying centralised operating costs are estimated in the region of GBP 1.21m, with a forecast annual growth of 10%.
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Watson itself is also continuing to expand its retail beauty network, in turn creating further distribution opportunity for Incanthera. The A.S. Watson group of companies currently represents the world’s biggest international health & beauty network with a 159m loyalty base.
Growth in Watson’s retail network is coming primarily from Southeast Asia and Eastern Europe. Revenue growth was led by Asia last year at +20%. This is something to keep a close eye on, as distribution for Skin+CELL outside Europe could be the real game changer for Incanthera.
Strong investor interest in Incanthera
Incanthera is also reporting considerable interest from institutional investors. It decided to raise additional funds in order to increase its product launch scale. The decision was taken following high demand from small cap fund managers as well as its strategic distribution partners.
While the focus is currently on maximising the distribution opportunity in central Europe in the key pre-Christmas trading phase, Incanthera also said there may be an early move into the Hong Kong market, ahead of a projected roll out in Asia next year.
