Overview: Enero Group Limited (“Enero”, “the Company”) is a boutique network of marketing and communications businesses offering clients a full range of marketing and communication services. EGG focuses on integrated marketing and communication services, including strategy, market research, advertising, and corporate communications. The Company consists of 10 marketing and communication s services businesses across seven countries.
Catalysts: Following a period of financial challenges, Enero Group experiences renewed growth across all key metrics, driven by organic expansion and acquisitions in key geographical markets. Continuation of this trend has the potential to deliver shareholder value via a mix of earnings growth and dividends. Enero generates free cash flow from its operations and coupled with a cash balance of $38.4 million we see the potential for further value-added acquisitions and group reinvestment.
Hurdles: There is no guarantee that the recent turnaround will extend and that Enero will continue to deliver revenue and earnings growth. Historically Enero’s business was vulnerable to currency fluctuations and economic sentiment which could have a negative impact on its financial performance. Entry barriers to the industry are low and Enero may be subject to increasing competition.
Investment View: Enero Group offers profitable exposure to advertising and communication trends. We see Enero as a turnaround play as recent growth initiatives have materialised following a period of operational challenges and declining revenues. The Company’s primary geographical markets – Australia, Europe, and the USA – are growing simultaneously and recent acquisitions have been successfully integrated and enhanced the company’s earnings profile. We see the potential for capital management initiatives for shareholders and initiate coverage with a “buy” recommendation.