Ed­u­ca­tion will al­ways be a need

Finweek English Edition - - Marketplace - By Si­mon Brown

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. ■

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