There’s a les­son here…

Finweek English Edition - - COMPANIES & MARKETS - MARC HASENFUSS

THE MAR­KET – at least the mul­ti­tude of ex­citable re­tail in­vestors – has gone com­pletely gaga for newly listed pri­vate ed­u­ca­tion group Curro Hold­ings. And rightly so. This PSG-con­trolled ven­ture may well have some strong legs in its ef­forts to tap South Africa’s sprawl­ing mid­dle class pri­vate ed­u­ca­tion sec­tor.

The suc­cess­ful list­ing of Curro hardly seems to have rubbed off on Ad­vTech, a pri­vate ed­u­ca­tion ven­ture that listed in the late Nineties and has built an en­vi­able niche around re­spected brands such as Craw­ford Col­lege, Rose­bank Col­lege, Var­sity Col­lege, Ab­bots and (more re­cently) Trin­i­ty­house.

In fact, Ad­vTech re­mains well off its an­nual high of 640c seen in Oc­to­ber last year. At cur­rent lev­els of around 560c, Ad­vTech is trad­ing at an earn­ings mul­ti­ple of around 15 times. Some may ar­gue that’s quite de­mand­ing (al­though cer­tainly not mea­sured against Curro’s de­mand­ing for­ward earn­ings mul­ti­ple) but Ad­vTech is ar­guably worth the mod­est pre­mium.

Over the past decade Ad­vTech has shown it’s a busi­ness ca­pa­ble of churn­ing the kind of strong cash flows that can back a gen­er­ous div­i­dend pol­icy (close to 4%). The com­pany also holds a re­in­forced bal­ance sheet, there’s a tan­gi­ble value un­der­pin in the form of R880m worth of fixed prop­erty, the busi­ness is as­tutely man­aged and has brands con­sis­tently en­hanced by en­vi­able aca­demic per­for­mance.

While Curro prob­a­bly has the mar­ket cap­ti­vated by some bold ex­pan­sion plans, it’s not as if Ad­vTech is stand­ing still. The re­cent ex­pan­sion of Trin­i­ty­house in the West Rand sug­gests that the re­cently ac­quired brand can be fairly eas­ily repli­cated.

Ad­vTech also isn’t afraid to shift into niche ven­tures: The De­sign School South­ern Africa be­ing a prime ex­am­ple.

Prob­a­bly one of the big­gest sell­ing points for Ad­vTech as an in­vest­ment is the cal­i­bre of in­sti­tu­tional share­hold­ers it’s en­rolled. Be­tween Corona­tion (17,7%), San­lam (13,8%), Old Mu­tual (10,3%) and RMB (7,7%) around 50% of Ad­vTech is in in­sti­tu­tional hands.

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