Financial Mail - Investors Monthly - - Opening Bell -

Share price: R13.91 JSE code:

HOLD ADVTECH IS THE MOST LEARNED OF the pri­vate ed­u­ca­tion stocks, hav­ing been listed on the JSE for many more semesters than its ri­vals. It has mostly been con­ser­va­tively man­aged, with man­age­ment cau­tiously mo­bil­is­ing the re­li­able cash flows from brands like Craw­ford Col­leges, Var­sity Col­lege, Ab­botts and Trin­ity House to ex­pand the op­er­a­tional foot­print. In re­cent years Advtech has taken a more ag­gres­sive growth track, an­nounc­ing large cap­i­tal ex­pen­di­ture plans and snag­ging sev­eral key ac­qui­si­tions of es­tab­lished pri­vate school brands.

An un­so­licited (but un­suc­cess­ful) takeover at­tempt by Curro ap­pears to have mo­ti­vated Advtech man­age­ment even more, and the com­pany has started to show signs that it is ca­pa­ble of chalk­ing up strong, sus­tain­able earn­ings growth. While Advtech is the model pupil of the JSE’s pri­vate ed­u­ca­tion sec­tor, the share price has in re­cent months shifted up to much more de­mand­ing lev­els. At the time of writ­ing the trail­ing earn­ings mul­ti­ple of 27 times sug­gests the medium-term profit prospects are al­ready priced into the share.

So we would rate Advtech a hold — though the share should still ap­peal to longer-term in­vestors who value re­li­able cash flows, a de­ter­mined man­age­ment team, strong brands and a fairly gen­er­ous div­i­dend pol­icy. But don’t be sur­prised if the un­der­ap­pre­ci­ated ter­tiary divi­sion be­comes a far larger profit gen­er­a­tor and if large in­ter­na­tional ed­u­ca­tion en­ti­ties start sniff­ing around the com­pany.

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