Following the interim results from Curro Holdings Limited (JSE: COH), ADvTech Group (JSE: ADH), and Stadio Holdings (JSE: SDO), two quiet movers in yesterday’s trading session reached 52-week highs. The share price increased by almost 3% yesterday when Curro released its interim financial results for 2023. Despite the unfavourable playing field that our nation’s customers have been dealt, market players have recognised the value of investing in education.
Enrolments and revenue increased by 6% and 17%, respectively, at Curro Holdings Limited (COH). The enrolments at Curro are lower than the average. In the most recent results, ADvTech Limited’s revenue increased by 18% to R6.96 billion, backed by expansion in the schools sector, particularly activities in Kenya and Botswana. ADvTech Group has been doing well. Student enrolment is up 5%, with schools accounting for 7% of the increase and tertiary institutions for 4%.
Figure 1: Normalised year-to-date performance for ADvTech, Curro, and Stadio
The year-to-date performance of the share price has erratically as the has moved in such a way that could insinuate that AdvTech is the star pupil. The group’s revenue growth is higher than both of its peers. The share prices showed a modest rise thus far, as seen in the graph above. Since these organisations’ enrolments provide revenue throughout the year, the first half of the calendar year is a crucial reporting period for them. In other words, if there is a revenue shortfall now, it will be challenging to make up for this in the second half, and you can thus anticipate a poor complete year.
Stadio Holdings Limited
Stadio Holdings Limited’s (JSE: SDO) growth profile shows consistent growth while also emphasising Stadio’s revenue increase of 11% to R1.21 billion this time and enrolment growth of 8%. Stadio attributed the rise in profit partly to strict cost management and organic development in its underlying institutions. The full-year earnings of Stadio, a JSE-listed education company, increased as more students enrolled in distant learning models during the year ending on December 31, 2022. For the period, dividends rose by 89% to 8.9 cents per share. Additionally, Stadio’s ambitions to increase the number of certified programs it offers from the current 86 to another 31 over the following few years is evidence of the value it can bring to the local’s educational system.
Figure 2: Comparable valuation vs. 52-week performance for Stadio
The private education company AdvTech Limited (JSE: ADH) owns tertiary education companies like Vega, Varsity College, and Rosebank College and school names like Crawford International, Trinity House, and Abbotts College High School. The company published a trading statement on August 10 that revealed basic normalised earnings per share (NEPS) had increased by as much as 27% from the previous year. In the next six months, basic headline earnings per share (Heps) could increase by 21% to 26% compared to the last comparable period. On August 28, 2023, the group is scheduled to announce its half-year financial results. Apart from its operations in South Africa, the business, which also has operations there and in Kenya, reported that its operations on the continent witnessed a 25% increase in sales and a 69% increase in operating profit. In September 2023, Chris Boulle will step down as AdvTech’s chair after serving the board for 12 years.
The rest of Africa’s resourcing operations recorded a 46% increase in revenue and a 151% increase in operating profit during the same period. While resourcing operations in the nation were enhanced by 11% and operational profit by 7%, SA schools had a 14% gain in income and a 17% increase in operating profit. Revenue and operational profit for the entire year increased by 12% for tertiary operations. According to AdvTech, this “strong cash generation” trend is expected to remain. “AdvTech remains uniquely positioned to benefit from the continued growth in demand for education in both South Africa and particularly in the rest of Africa,” added Douglas. “This gives us confidence and an expectation that we will continue on our growth trajectory, along with the good enrolment growth achieved at the start of 2023 in both our schools and tertiary divisions,” the statement continued.
Figure 3: Comparable valuation vs. 52-week performance for ADvTech
Curro Holdings Limited
Private education company Curro Holdings Limited (JSE: COH) reported a 3% increase in student enrolment across its portfolio in the six months ending in June 2023, which lifted revenue and earnings and increased expenditures. The group informed investors on Monday that the rise in enrolment has enabled a 14% increase in tuition prices over the past six months. This and annual fee increases contributed to the R2.38 billion income rise of 16%. Curro reported an increase in auxiliary income of 31% to R53 million.
Figure 4:Daily chart for Curro Holdings Limited from November 2021
The share price for Curro Holdings Limited has decreased from a high of R14.50 at the beginning of 2022. The price action has been trading below a trend line and has only been able to trade above the line in June of this year. After the change in trend, the share price has struggled to reach the most recent resistance level of R9.50, which has been tested twice recently. We are currently in limbo. The MACD and EMA indicators are at a turning point, not indicating anything yet. With the latest share price action, we also see an ascending triangle forming.
The company claims that the portfolio expansion of the group to include HeronBridge College and Courtney House International School is a factor in the 24% increase in other expenses and the 11% increase in labour costs. According to Curro, it will invest R800 million in capital projects in the 2023 fiscal year to maintain, upgrade, and expand facilities. Curro invested R1.1 billion in the company in 2022. The business thinks there will always be a high demand for private education. The 14.1% increase in tuition costs that year helped the revenue to grow. According to the company, the level of fee hikes was required by the rise in the number of learners and also covered anticipated yearly cost increases. Operating activities resulted in the group’s cash flow of R800 million, 4% more than in 2021. A dividend of 11.08 cents per share was announced for the period, a 35% increase from the prior year.
Curro is still researching alternative energy options to lessen its reliance on the power grid. According to the firm, it invested roughly R45 million in capex in 2022 to reduce load shedding. Diesel expenses for the period totalled R6 million, and given that there will likely be increased load shedding through 2023, these expenses could increase in the upcoming fiscal year.
Figure 5:Comparable valuation vs. 52-week performance for Curro
According to the data, there is a demand for private and tertiary education in South Africa and other African nations. AdvTech’s management has created efficiencies that result in solid profitability growth while the company’s revenue is rising at the slowest rate. The tuition hikes at Curro schools were undoubtedly also necessary, but with each round of fee increases, Curro’s educational offering loses ground to rivals who do not raise their prices. The key to the three businesses’ sustainable growth is good management.
Sources: KoyFin, Trading View, MoneyWeb, Curro, ADvTech and Stadio
Author: Odwa Magwentshu
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