What happened: fashionette announced to replace its current management board and the start of discussions on a possible cooperation with major shareholder The Platform Group, including the evaluation of a business combination.

• CEO Georg Hesse and CTO Thomas Buhl will step down end of February and be replaced by Dr. Dominik Benner, managing shareholder and CEO of The Platform Group.
• The Platform Group has become the major shareholder in December 2022 and aims to transform fashionette into an online luxury platform business, potentially by ways of a business combination.
• No squeeze-out of minority shareholders or delisting is intended at the moment.

Our view: A business combination would make a lot of sense as fashionette would benefit from The Platform Group's eCom know-how with regards to tech, data, marketing and logistics. Moreover, fashionette should benefit from cross-selling across The Platform Group's ecosystem, operating online platforms across 16 verticals in Europe. All of this is seen to unlock synergies at fashionette, which should support the company's profitability in the mid-term.

Against this backdrop, the recent share price underperformance compared to peers looks unjustified. While eCom stocks have bounced back, fashionette is still trading at 0.7x book value (0.9x ex goodwill) despite generating solid organic growth this year and being slightly profitable on adj. EBITDA. An impairment of the goodwill related to Brandfield (€ 11m) looks unlikely at this stage given that Brandfield’s operating performance is still robust.

Operating cash flow came in at € 2.3m in FY22, implying an excellent € 8.3m in Q4, effectively converting its inventory to cash (€ 7m cash inflow in Q4). With that, FCF should have been positive at € 1.2m in FY22 (eNuW) despite the challenging market environment. Consequently, net debt should have improved to € 8.4m (eNuW: € 8.3m) compared to € 16.7m in Q3 and € 8.7m end of FY21. Financing is not seen to be an issue as financial liabilities mature in 26E and do not bear any covenants. Hence, the stock should catch-up to peers rather sooner than later.

BUY with an unchanged PT of € 21.00, based on DCF.