Education will always be a need
Education is one of those sectors most resistant to consumer pressure. Or so we thought. ADvTECH results show that some of its schools are struggling, while Curro had issues with its lower-income Meridian schools – both blamed in part on tough economic conditions.
That said, with a lack of trust in the government education system, there will always be demand for private education even if tough economic times put a dampener on the demand.
ADvTECH has great school and tertiary education brands, with the latter doing very well in the last set of results. The challenge is finding new schools; greenfield expansion is a challenge as well-located land is often in very short supply. So a lot of growth will come from acquisitions, coupled with fee increases (likely to average above inflation) and increasing existing schools’ capacity.
The recruitment business within ADvTECH does not excite me. I wonder if the company will eventually sell or list it separately.
As a last point, Curro is also a great business but markedly more expensive. Hence the choice of ADvTECH, which I calculate at fair value at current levels. I am prepared to buy at up to 1 970c. ■