Still a class act
The share price of Curro Holdings has been marked down in recent months, and is now at far less than the R57 record high registered at the end of 2015. This, of course, made the recent AGM a fairly intriguing affair. A key moment, for me, was when financial director Bernardt van der Linde addressed a question about the possibility of Curro paying a maiden dividend in the 2019 financial year.
There was much diplomatic oohing and aahing, with shareholders being reminded that several factors would come into play when assessing whether part of Curro’s compelling cash flows could be earmarked for them.
The key consideration, of course, is acquisitions. As reported in Business Day last week, Curro could spend more than a quarter of its envisaged R2.2bn capital expenditure for acquisitions this financial year on a handful of targets. In other words, Curro will continue looking at smaller opportunities rather than tilting at one of the large school groups.
CEO Andries Greyling did jokingly refer to taking over rival Advtech (something Curro tried a few years ago) but stressed that vendors at large private school businesses are bandying about steep multiples that offer limited upside potential. In truth, Curro has an enviable track record of acquiring smaller private schools and then ratcheting up profitability with cost cutting and expansion.
It’s not as if Curro, with its land banking efforts looking reassuring, needs to chase acquisitions. It already has 53,000 learners in 148 schools across 60 campuses, and expects that by 2020 this number will be 177 schools across 76 campuses.
My fantasy deal would be for Curro’s corporate cousin and recently unbundled private tertiary education business Stadio to merge with Advtech’s wellestablished tertiary arm. The inspired efforts by Stadio CEO Chris van der Merwe in rapidly building out the multiversity campus concept, coupled with Advtech’s highly profitable tertiary brands, could create a private education juggernaut capable of consolidating a fragmented sector and chalking up sizeable profit growth.
Is this a buy signal?
A few companies actually get their timing (and pricing) right for share buybacks. Claddings specialist Mazor has been slick in its share buyback exercises, including the legendary exercise in 2009 when shares repurchased at a lower price were on-sold to Global Capital at a sizeable profit.
Last week Mazor announced it had bought back about 4.3m shares (3.95% of the issued scrip). The purchase price ranged between 150c/share and 160c/share, higher than the ruling price for Mazor at the time of writing. It still has shareholder approval to buy back about 17.5m shares, which presumably is a serious option at 140c/share.
Mazor has in the past shown the ability to bounce back from weak points in the construction cycle. A willingness to scoop up more shares on the open market will reinforce notions that the company is confident of firmer profit foundations in the new financial year.
Of course, it must be tempting for the Mazor family to pitch a buyout offer to minority shareholders and take the company off the JSE.
Worked out?
Deep-value investors must have been jolted by the resignation of Philip Froom as CEO of services group Workforce Holdings. Hopefully his unexpected departure is not a dire pronouncement about effort to unlock value at Workforce, which trades on a trailing earnings multiple of 2.6.
With Froom gone, the corporate catch 22 remains even more worrying: the unwillingness to issue paper for acquisitions and the necessity to raise fresh capital because the share price is too low mean a continued lack of trade in the share and only a remote chance of dividends, along with an ongoing suppression of the share price.
It’s not as if Curro, with its land banking efforts looking reassuring, needs to chase acquisitions