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.