Given we've now passed the June tax selling season,...

Given we've now passed the June tax selling season, it's worth revisiting what happened to Enero (then Photon group) in 2010. I had a look at this as was trying to understand why the market is so cautious now on this name.

At that time, the company had to do a massively dilutive capital raise (on the back of another raise 12 months earlier) due to high debt levels and substantial earnout payments coming due. If you took a 5 minute look at this stock today as part of a screening process, you could easily pass over this stock on the basis that what happened in 2010 could happen again. However I've dug into this a bit more and would make the following comments that make todays situation very different.

Firstly, in 2010 the company was heavily geared. Including earnout payments, it's debt to EBITDA was 4x-5x based on semi normalised earnings, or closer to 10x reported EBITDA. This contrasts with less than 1x today. Secondly, the decline in earnings was not particularly significant once writedowns are excluded (and importantly it was still generating cash). This was in the immediate aftermath of the GFC so was a real test of the business model. I know the business has changed a lot since then due to M&A but it still has similar economic drivers.

I'm still convinced the market is ignoring value here which will hopefully be realised in due course. I'm also very keen to see the FY results and perversely am hoping that ROI DNA's results are poor so that the earnout shrinks or disappears. More importantly for this stock, it will likely just need time and announcements to clarify 1) the uncertainty around the outlook for OBMedia and 2) that cyclical factors are not as dire as the current share price suggests.