Ann: Trading Update, page-6

I've recently been alerted to EGG when it popped up on my stock screener as a value play due to it's currently low P/E and PEG ratios and high dividend yield, fortunately I held off buying as (being a boomer) I had difficulty in getting my head around the online marketing services industry and therefor quantifying EGG's business case.

With today's 'trading update' (or otherwise known as a profit warning...) it looks to me like EGG are gently guiding the market's expectations lower without stating the obvious... that 2023 NPAT and EPS will be below FY22; How so?

• Midpoint FY23 net revenue forecast of $242.5m - 1H/23 net revenue of $129.5m implies 2H/23 net revenues of $112.5m, a decline on 1H net revenues/gross profits of $17m.
• Midpoint FY23 forecast EBITDA of $79.5m - 1H/23 EBITDA of $44.3m implies 2H/23 EBITDA of $35.2m, a decline on 1H EBITDA of $9.1m.
• The above forecasts implies that EBITDA margins for 2H/23 were 28.7%, down from 34.2% for 1H/23 and totaling 32.9% for FY23, up a bit from FY22 EBITDA margins of 32.2%
• Implied NPAT for 2H/23 is therefor $11.75m, down from $14.8m for 1H/23, giving us $26.66m NPAT for FY23, down a little from FY22 NPAT of $27.1m
• Based on the above NPAT estimate and using 92.526m shares on issue as per the last buyback notice, 2H/23 EPS will be 12.7cps, down from 16.1cps in 1H/23, giving us 28.8cps for FY23, and down from 30.9cps for FY22.

Today's trading update definitely shows a big decline in EGG's operating performance from 1H >2H 2023 and points to a YoY decline in NPAT & EPS, and given broker forecasts on CommSec were guiding 13% EPS growth this may explain the soft share price of late.

Still the P/E figure should come in at around <6x at the current SP, but it's no longer the growth story it was and the 2H/23 results are a bit worrying. Anyway GLTAH and I'll be watching with interest. Cheers, marcusA