Started looking at Enero after finding it in a screen on Uncle Stocks, healthy metrics, first impression - Looking at a little business that is vaguely interesting, $EGG. 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!)
It looks very cheap on most metrics I look at, my valuation range is around $3.50 even when heavily reducing the FCF reported, (53c less adjustments for distortions of IFRS 16 & then reduced further to smooth for last few years.) The current price implies either high single digit negative growth and/or large drop in FCF, or very high IRR/MoS.
FCF took a hit in the H1 2023 result, mainly due to working capital changes & increased tax. Need to see what that looks like for the full year.
Reinvestment rate and ROIIC both very good, margins probably weakest metrics and that leads to a lowish operating cushion, generating only 14c of OCF for every $1 revenue.
EV/Sales is 0.37 which is quite cheap.
Yield is about 6%.
What does Enero do? It is a marketing, advertising and PR conglomerate servicing sectors they claim expertise and knowledge in, technology, healthcare and consumer. They divide the company in two segments, Brand Transformation (PR) and Creative Technology and Data.(ads, marketing). They have a strong focus on what they call the digital transformation - the move from traditional advertising to online basically. The business is geographically diversified operating in 11 countries and 15 cities, with over 750 employees.
This is some of the keywords they use to describe their purpose,
* Analyst relations
* Digital marketing
* Branding
* Content strategy
* Research & analytics
* Consulting
* Platforms
* Communications
* Communities
* Creative advertising and brand strategy
* Integrated campaign development
* Proprietary Photography Studio
* Short and long form content development and production
* Design
* CRM
* Public Relations
* Public Affairs and Government relations to influence perceptions and manage reputations
This is a summary from the 2022 Annual report,
Strategy and operations of the Group
The boutique force in modern marketing, Enero Group is an international network of marketing and communications businesses located in 11 countries, with over 750 employees (at the date of this report). Enero is a group of specialists who accelerate high-growth businesses by transforming brands and deploying creative data and technology to enrich customer experiences. During the current year, the Group includes BMF, CPR, Hotwire, Orchard and OBMedia. The Group’s service offering includes integrated marketing and communication services including strategy, advertising, public relations, communications planning, design, events management, direct marketing and programmatic media.
The Group has three key geographic locations: Australia, UK and USA – which house the majority of the Group’s businesses and employees. The Group also has a number of non-owned affiliates in other geographic areas which connect the Group into a global network. Being a nimble team with a global perspective, the Group is well positioned to take advantage of the new developments taking place in this highly dynamic sector.
I like the business, my reservations are probably around the relatively new BoD & my struggle to really understand and articulate what they do! The fact is I dont have enough conviction to either sell down or sell off an existing position in order to take a position in EGG so at this stage I will probably give it a miss.
$1.87 16/3/23
Finally got in contact with IR, only to discover they outsource it to their share registry! An instant red flag for me, they waffle endlessly about shareholder engagement and value creation - then cant be bothered communicating with them! The Share registry employee clearly had no idea what they were talking about, just referenced web presentations rather than answering questions. Very disappointing.
