EGG - Enero Group

[System]

Enero Group Limited (EGG) was formerly known as Photon Group Limited (PGA).

Previous discussion of this company can be found in the PGA thread: https://www.aussiestockforums.com/forums/showthread.php?t=11885

 

[greggles]

Breakout for Enero Group today following the release of its Half Year Report and Financial Statements.

Here's the highlights:

The market liked the 45.99% increase in gross revenue and 60.59% increase in profit after tax and pushed the EGG share price up 15.63% to $1.48. It is currently at all-time highs.

A great result overall and an indicator that EGG is growing strongly.

 

[galumay]

Looking at this little business. Metrics are good, but 20 year CEO departing, leaving a very new BoD, (<5yrs) is a concern. Found it turning rocks, so nothing to go on other than my research & analysis. (how i like it!)

 

[Dona Ferentes]

. Found it turning rocks, so nothing to go on other than my research & analysis.

Might have found itself in a hard place ....
EGG today announces that it has successfully secured the US$7.82 million cash that was on deposit at Silicon Valley Bank with the funds now held in a major US financial institution

 

[galumay]

I think that is largely irrelevant, TBH. Plenty of businesses had cash on deposit with SVB. Certainly doesn't inform my analysis as nothing ended up happening.

 

[finicky]

Enero (EGG) @ 1.65

This looks cheap, as long as the world economy doesn't point its toes to the sky. It's trading at book value yet, looking at the last 4 years, its median ROE is 14%. I very quickly gave up trying to understand what it does - seems to be a business to business providing digital marketing services.
The H1 result was quite good as far as revenue and ebitda growth but there was weak eps growth. Management says macro headwinds, clients holding back and this has continued into H2.
Problem is, the chart. I'd pick a chart like this to go lower. I'm interpreting it as a head and shoulders reversal in progress - neckline at 2.50 suggesting a rule of thumb target of 0.75. The Wuhan low was also 0.75. The weekly indicators suggest oversold so maybe it'll manage a doomed rally?

Not Held

WEEKLY

H1 REPORT

 

[galumay]

Hey @finicky I am still looking at EGG, re the weak eps growth, one thing I uncovered is that there are non-controlling interests in the business and the earnings end up being diluted by the income stream to these interests, the % of dilution is variable and I suspect its some sort of earn out related to acquisitions. No real problem with that if I can get my head around it, so emailed the IR and got no reply, emailed the main address, got no reply. So that is a red flag!

Second problem is the one you identify, I have spent weeks looking at this business, and I still couldn't tell you what they did in a sentence a 12 year old could understand, which is one of my investment criteria!

 

[galumay]

Finally got a reply from EGG, "...Non-controlling interests (NCI) refer to the 49% of OB Media that is not owned by Enero Group."

Probably enough to put me off at this stage.

 

[finicky]

I don't really understand this - are the earnings diverted before the officially stated eps figure that I would get from CommSec? If so, why is it an issue when figuring an 'intrinsic value'?

 

[galumay]

More than anything else its just messy @finicky, because one of the business units is only 51% owned its hard to work out what the whole business financials look like thru the cash flow, up the balance sheet and into the income statement. The impact seems to vary over the half yearly an annual reports, which I think is because the financials are opaque and difficult to look thru due to the NCI's.

I just tend to avoid these situations because i am not very smart and can't deal with anything other than pretty simple financials!