House View:

Ad­vTech, Kumba Iron Ore

Finweek English Edition - - CONTENTS -

In pre­vi­ous years (March 2012 and again March 2014) I sug­gested this stock was at best a hold. While it op­er­ates in a great sec­tor, the com­pany just never seemed to be fir­ing on all its cylin­ders. Then in June of last year there was a po­ten­tial of­fer from Curro at 1 300c and I sug­gested share­hold­ers take it if it ma­te­ri­alised. It didn’t.

I was wrong – the stock has been fly­ing since my hold rec­om­men­da­tions, al­though Ad­vTech is up less than 10% since my sell sug­ges­tion of last year.

But re­cent re­sults show a com­pany that is now soar­ing, with ter­tiary do­ing es­pe­cially well. It’s just un­der­taken a rights is­sue as well as some ac­qui­si­tions and still has a pile of money and/or debt it can use for fur­ther ac­qui­si­tions or to ex­pand cur­rent prop­er­ties. This ex­pan­sion is par­tic­u­larly in­ter­est­ing. Ed­u­ca­tion is very lever­aged in that new stu­dents add in­come with­out re­ally im­pact­ing costs and Ad­vTech not only has some 15% ex­tra ca­pac­ity at ex­ist­ing sites, but could add even more ca­pac­ity with new build­ings on site – which avoids the has­sles of find­ing a site, build­ing and start­ing a new school.

The stock has been fly­ing since my hold rec­om­men­da­tions, al­though Ad­vTech is up less 10%than since my sell sug­ges­tion of last year.

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