The tide is turning on this small cap education stock

The tide is turning on this small cap education stock

In this Issue:

  • PSG backed education provider bottoms out at R2.22
  • Private tertiary education providers fill an important gap

 

The most lucrative opportunities are found in times of maximum pessimism. Investors just need to filter through the noise for the right shares to invest in, that have potential tail winds in the months and years ahead.

Small caps have lost favour with investors. Many are trading at all-time lows while growing profits steady in these tough economic times.

One such share is a little-known private tertiary education provider, Stadio. It was unbundled from Curro and is majority held by PSG and management. PSG typically invests for the long run and works tirelessly to maximise shareholder value.

Stadio’s share price raced up to R8 shortly after listing on the excitement of what the future holds, but it steadily sold off after a rights issue last year. The share price has bottomed out hitting a low of R2.22. And our market scanner has signalled it is very oversold (STD 2.5) with a high probability of bouncing in the weeks and months ahead.

Its interim results to 30 June 2019 have been good and signal the company is on track to reward patient investors. Revenue increased 38% and earnings increased 42%. And it is strongly cash generative. Its net asset value is just over R2 per share.

Private tertiary education providers fill an important gap

South Africa’s current tertiary institutions can only accommodate roughly half of the matriculants awarded university exemptions. There is a great need for tertiary institutions that provide contact, distance and online learning. Stadio is working on exactly that.

 

Stadio is working on completing a large campus under the Multiversity brand in Centurion by 2021 and a second in Durbanville in 2022, with a KZN campus shortly after.

 

All current tertiary institutions like Milpark Education, AFDA, Embury etc will be re-branded to Multiversity next year as it ramps up it’s marketing to attract more students. Its goal is to quadruple the current number of enrolled students to above 100,000. Achieving this could grow Stadio’s earnings significantly.

 

Buy Stadio (SDO) below R2.45 and hold for at least the next 18 months.

The week ahead:

  • Local: Manufacturing Production & Sales (10/09); Business confidence index (11/09)
  • Local Results Due: A-V-I, Caxton (09/09), Afrox, Attacq (10/09); Aspen, Capreg, Growpnt, Silverb (11/09); Spurcorp, Upartners (12/09); Afro-C, Arcinvest, Kibo, Net1ueps (13/09)
  • LDT: Absa, Absabank Pref, Distell, Grindrod Pref, Grindrod, Itltile, Naspers, Nedbank, Novus, South32, Stanbank, Truwths, Fnb holdings (10/09)
  • Special Dividends: Itltile, Rbp conv (10/09); Fnb holdings (13/09)

 

Other Economic data releases of interest…

  • Monday: GDP, Manufacturing Production (UK)
  • Tuesday: CPI, New Loans (CNY); NAB Business Confidence (AUS); Average Earnings Index (UK)
  • Wednesday: Westpac Consumer Sentiment (AUS); Core PPI, Crude Oil Inventories (USA)
  • Thursday: Core CPI (USA); Main Refinancing Rate, Monetary Policy Statement, ECB Press Conference (EU); OPEC-JMMC Meetings (All)
  • Friday: Business NZ Manufacturing Index (NZL); Core Retail Sales (USA)

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