This report is an updated version of the report published on the 3 April 2024 at 3:55 PM AEDT.

Enero Group Limited (ASX: EGG)

EGG is an Australia-based company that manages a portfolio of marketing, technology, and communications businesses. The principal activities of EGG are integrated marketing and communication services, including strategy, market research and insights, advertising, and public relations.

Recommendation Rationale – SELL at AUD 1.895

• Financial Performance: EGG’s net revenue declined by nearly 22.4% YoY to AUD 100.4mn in 1HFY24 vs AUD 129.5mn in 1HFY23, due to adverse macroeconomic conditions during the period. The company’s EBITDA declined by 48.2% YoY to AUD 23mn in 1HFY24. However, free cash flow reached AUD 16.9mn in 1HFY24 compared to AUD 2.1mn in 1HFY23.
• Outlook: EGG is continuing its proactive approach to managing costs amidst ongoing challenges. The company remains committed to scaling its healthcare capabilities. Furthermore, it is actively assessing potential partnership opportunities to further its strategic objectives.
• Emerging Risks: Technology changes, current adverse macroeconomic conditions, key personnel, and regulatory constraints, etc.
• TTM-Based Valuation: On a TTM basis, the stock of EGG is trading at a Price/Earning Value multiple of 8.3x compared to the Industry Average (Media & Publishing) of 6.1x and thus seems overvalued.
• Technical Commentary: On the daily chart, EGG prices are sustained below the horizontal trendline resistance level. Moreover, the momentum oscillator RSI (14-period) is showing a reading of ~65.02 level. However, the prices are trading above the trend-following indicator 21-period SMA, which may act as a support zone. An important support level for the stock is placed at AUD 1.65, while the key resistance levels are placed at AUD 2.05.

EGG Daily Chart

Currently, the stock is trading close to its resistance 2 level, hence representing a profit booking opportunity. Given its current trading levels, recent rally in the share price, and risks associated, it is prudent to book profit at the current levels. Hence, a ‘Sell’ recommendation is given on the stock at the current market price of AUD 1.895, at 10:05 AM AEDT, as of 3 April 2024.

Note 1: Past performance is neither an indicator nor a guarantee of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 3 April 2024. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: In general, it is a level to protect further losses in case of any unfavourable movement in the stock prices.