First I have heard of this:
Evolve IPO runs hot
Best Wishes
Paper Tiger
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First I have heard of this:
Evolve IPO runs hot
Best Wishes
Paper Tiger
Had heard that PORSE was being sold, did not know who to though.
Is this where some of the selling in RYM and Sum have/will go??
Another article in the Herald
going for $1,
loss this FY (2015),
profit next,
dividends all round.
and Norah Barlow.
Best Wishes
Paper Tiger
Loving the prospectus. It has all the box ticking bits. Especially like the dividend policy of 40%-60% NPAT - nice and conservative. The net dividend is okay assuming they can deliver the harmonious amalgamation. A generally professional prospectus.
Not overly keen on only forecast info and none of the previous year info. Presumably they would argue that this is without PORSE and Lollipops, but I still want to know what was running prior to their empire build.
Seems to be a bit rushed to get everything clear before Christmas.
I'm in for this one I think, if I can get some that is.
Another acquisition for Evolve. Looking forward to the float this morning
https://nz.news.yahoo.com/a/-/top-st...lve-education/
What happened to ABC learning with its MCAP of 2.5 billion in 2006 on the ASX?
They were running the same strategy as evolve.
Good luck for those who are in for the long term. Too much risk for me. Govt changes to funding in this industry are messy to say the least.
I have a feeling that this one will always underperform due to "external factors".
DYOR
Really like the look of this one myself. Thought the offer price of $1 was very competitive, Impressive margins on projections. Not too worried about regulation pressures... Nice long -termer
I agree, I like it too Benjitara. I'm not concerned about govt regulation - it would be an incredibly unpopular move to reduce funding for early childhood education (ECE) with the cost of living the way it is - many families need two earners. From memory the prospectus talked about how the number of women going back into the workforce is increasing by 2% per year. I love companies with significant macro trends fueling demand (think Ryman etc).
I have friends who own ECE centres and they're cash cows.
The directors of this company also have a successful record of consolidating companies (from memory they did it with pharmacy companies) and this model has been successful with ECE centres in Australia recently (delivering significant shareprice appreciation for shareholders). Institutional demand for EVO was strong in Australia (probably in part for this reason).
A broker(Forbar) has started coverage on EVO. Outperform rating and target of 1.21
More details here
http://markets.ft.com/research/Marke...asts?s=EVO:NZC
and here
http://www.reuters.com/finance/stock...?symbol=EVO.NZ
Norah Barlow and Forsyth Barr, names you can really "trust". Credit Sails, Feltex, South Canterbury Finance, SUM insider trading. Good luck Noodles.
3 million shares yesterday and another 3 million today - milford buying even more ?
Thanks Slam dunk, that would explain it and I will be watching with interest.
Hold.
Does anyone understand why the share price has dropped after a positive financial report?
They appear fully priced if you compare to their Aussie counterparts. Affinity are trading at a low (79c) down from a Feb high (1.40.) G8 are at 3.30 (hovering around their 12 month low mark.) G8 have a PE of 20. EVO is at 23.
I'm struggling it see where the growth will come from to support those valuations? It's hard to evaluate the earnings potential of an EEC - but there has to be some concrete ceilings around roll size etc. Other aspects of the business, especially Lollipops, are mature (it probably needs revitalising.) Perhaps, they will get some cost savings synergies from centralising the 80 odd aspects of their business, if that's what they're planning? Either way, that's not something that sets my pulse racing.
Looking at the pricing of established dividend yield stock in the current market, EVOs share price, if it is seen as primarily a future dividend play , looks like it has more downside risk yet. Nothing is the report suggests they are chasing growth.
Appreciate you sharing your observations H/P and joining dots. Great first post which wouldn't have come without the question from another first poster:t_up:
Welcome to the forum Hectorplains.
We can't use FY15 earnings (giving pe=23) as a indicator of value. This is because they are trading for only 3 months for FY15. FY16 is a far better measure. This would give you a pe=10. I would argue that EVO is one of the few bargains left on the NZX.
Their main risk is their short trading history and ability for management to execute without a track record. To date, they have exceeded all their PFI metrics.
I own EVO.
I have to disagree. They've stated that acquisition and expansion is firmly on their minds (as stated in the quarterly report they continue to acquire centers ) and even with these acquisitions they'll only occupy approx. 5% of the total eec's in NZ. I thought they were reasonable with their IPO price and have them 10-15% underpriced. It'll be interesting to see how it all goes but I do like the prospects.
Paradice becoming a SSH is a positive. They stock pickers who generally pick more winners than losers.
Norah being Chair puts the shivers up some people's spine.
And noodles being a shareholder ....don't know if that a good sign or not (couldn't resist that)
Might have a closer look myself .....that definitely a bad sign.
lol. It is a fair call. I get about 50% of my picks wrong. But I quickly work out that I'm wrong and sell. I add to my winners and let them run. For me, I need become a shareholder for a while to really understand the business. What I'm trying to say is that once you have skin in the game, you become a lot more focused.
I also take a lot of comfort from Paradice joining the register.
Thanks for that.
This is interesting - http://www.fool.com.au/2015/06/24/no...-education-ltd - some of the same factors are in play with EVO.
That's a pretty sad story
One thing I have learnt over the years is that you need to follow the charts with these sort of outfits that growing by acquisition and consolidating a fragmented market.
Sentiment rules. Fundamentals/broker targets and whether acquisitions are eps accretive generally mean squat all. At times they will appear undervalued and at times appear to get more and more outrageously overvalued. Just follow the squiggly line and ride any wave up but when punters turn against the company so does the share price.
One other observation ....at some point in time there always appears to be a point where further acquisitions (counter intuitively) Dont seem to add any more value.
So watching that squiggly line I am .....not that bright at the moment but maybe early days ....or is Norah a drag on the share price.
Different market but same sort of acquisition / consolidation / capturing efficiencies model is Greencross GXL
Their chart reflects whst I was trying to say in above post
Jeez that GEM chart looks pretty sad as well.
Common theme here ..... EVO will need to be something special if tarred with the same brush
Interesting
Hope you have these as well noodles:
Applied Equity Analysis: Stock Valuation Techniques for Wall Street Professionals – May 14, 2001 by James English
Behavioural Investing: A Practitioners Guide to Applying Behavioural Finance – October 29, 2007 by James Montier
and this is a must
Predictably Irrational: The Hidden Forces That Shape Our Decisions Paperback – April 27, 2010 by Dan Ariely
Good to have a skim through when you do something really stupid and wonder why .... confirms you are normal after all
EVO - another stock that meets my wouldnt touch with a barge pole test.
#1 risk - Assets - childcare - the value is 'generally' in the location. What, you mean you let them float the company without the underlying property assets? When the lease is up, the owner can in theory tell them to GTFO, rebadge as Poplolly Childcare and reap the benefits. Or just put up rents to eye-watering levels. Quite staggering the market is assuming this will NEVER happen.
Government subsidy - if you dont see the risk in income relying on 60%+ of government money, while at the same time declaring fabulous profits, you are pretty blinkered.
Yep there is home childcare packaged in there as well, but the big sell is the educare centres.
For the reasons above, I see Evolve as one of the riskiest stocks on the NZX, but not being priced that way.
From the Investment statement
"Evolve Education’s leases vary, but the term of the majority ofleases will be for approximately 15 years or more"
That is longer than DCF calculations! So I don't see this as a risk.
Fair call on the government subsidy. However, we should expect EVO to be one of the lowest cost operators in the industry due to their economies of scale. If government decide to cut subsidies, we might see a lot of other child care businesses close. It is also worth noting that the last budget actually increased child care funding
Fair cop - I didnt realise the lease terms were that long - have they provided an average lease term across the portfolio?
But - the discounted terminal value after 15 years is around 40% of the sum of discounted terminal value and discounted interim stream of cash flows - so it isn't immaterial.***
I presume any new assets they buy will not be subject to such long lease terms?
Still a risk for mine.
*** depends on the assumptions you use of course, I'm assuming 2.5% growth and an 8.5% discount rate.
Anecdotal feedback - I had an interesting discussion with my sister-in-law over coffee yesterday. She works at what was previously an upmarket day care centre in one of Auckland more affluent suburbs which was taken over by Evolve some months back.
I asked her how's things at work and got the following.
Bloody awful.!!...said with a highly discontented frowning look. I took the bait..as you do and asked why ?
Her - The whole atmosphere of the place has changed. We're not allowed to even heat the place properly, (this piqued my interest as I'm aware that according to the world health organisation the minimum temperature for a healthy workplace is 16 degrees Celsius).
Me - What do you mean don't they have a heat pump or two ?
Her - No they have a single electric heater and we're not allowed to run it much.
Me - What has been a typical temperature during the last week inside the centre ?
Her - 11 degrees and if we complain we run a real risk of being fired like my friend was last week. She went on - The kids used to get fresh fruit and decent lunches, now they get cheap rice crackers, (for those that don't know these are the $1 packs of cheap biscuits) and for lunch its mainly pasta and rice.
Me - Because that's the cheapest food they can provide right ?
Her- You got it.
She continued - I wouldn't dare ask for new teacher aids, equipment or toys for the kids...the word has come down, we keep costs to the absolute minimum.
Me - How are parents reacting to this ?
Her - We've had quite a number of parents pull their kids out of the centre in the last few weeks. She continued - I'm really not happy and to make matters worse we don't have quite the ideal number of qualified v unqualified care givers...really they have one too many qualified caregivers for the ideal ratio and I think they're trying to get rid of me and hire an unqualified replacement because its cheaper.
Me - They want to run the leanest legally allowable qualified v unqualified care-giver ratio for the number of kids at the centre to keep costs to the lowest level don't they ?
Her - How did you guess ?
Me - What would happen if you reported the unhealthy environment, (meaning lack of heating), to the authorities ?
Her - I'd be certain to lose my job and get a bad reference so would probably be unable to find another one.
Me - Do the other staff feel the same way ?
Her - Yep.
We then went on and discussed my brothers problems at his workplace....I felt bloody happy to be self employed at the end of that discussion.
Undernourished, cold, discontented kids...is this the future of early childcare in N.Z ?
Me ol mate Norah Barlow...you can really trust her to direct this company in a manner that's in the best interests of our young kids right ??????
Do you really want to invest in a company knowing they're not committed to the very best standards for early childhood education and welfare and that its only for profit. Profit comes before kids welfare...something makes me really uneasy about that.
Hey Roger I think Norah will do an excellent job of teaching kids good eating habits and the consequences of unhealthy choices aye:eek2:
Hi Roger, very interesting discussion you had. I have had quite a bit to do with childcare centres and find most childcare centre owners very smart, good people. Invariably they have one thing in common, a passion for providing quality childcare. How you translate that to a corporate ownership is beyond me. The corporate operators all look at childcare with sharemarket eyes - they buy at PEs of 4-5 thinking that it is very cheap but not realising how quickly a centre can go from being very profitable to losing money. Most parents can smell a disinterested or stingy owner a mile off.
Re government funding, the government have got good research showing the low term benefits of good quality childcare. Obviously the return gets lower where the kids have a good home environment; at the moment basic funding for children is the same in Remuera as it is in Kawerau which you wouldn't think is sustainable long-term. What is happening now is that the basic funding is staying pretty static while equity funding (which targets low socio-economic, isolation, special needs) is increasing. Funnily enough, I don't see any Evolve centres in Kawerau.
Participation rates are very high now and if you look at long-term population projections of 0-4 year olds then the only major driver of increased demand is going to be increasing attendance hours. For some reason, people have this idea that ECE centres are a license to print money; I would say that a number I dealt with last year were breaking even on an EBIT basis and some were losing money. With a lot more popping up in the main centres there is huge pressure on occupancy - those that had waiting lists a couple of years ago might have vacancies now.
Home-based is where Evolve may shine but that is a relatively small part of their business. If your friend's experience is indicative of the rest of Evolve's centres then parents will desert in droves as there is plenty of choice these days.
Good post Snapper. I agree with what you've said. For my money and more importantly for the best care for my grandchildren on the face of it a nice caring couple are best placed to lead a team that provides the best possible environment for an early childcare centre. They live and work in the community and build respect and in so doing build profitability.
Corporatizing based on lowest possible input costs appears at least on the face of it to be counter intuitive in terms of maximising profitability given that as you quite rightly point out, there's lots of choice and people generally want the very best for their kids. I was shocked at the temperature issue, cheap and nasty food didn't shock as much.
In my opinion short term measures (like reducing electricity and food costs and lowering qualified staff ratio's and teacher aids to the bare legal minimum), to boost profitability will backfire on this company in the medium to long term as most parents have a finely tuned radar system when it comes to their kids satisfaction and wellbeing.
Sorry i cannot believe 11 degrees no way.
I am just telling you what we discussed. In her 50's with over a decade of experience in the sector.
I asked why the temperature was so low and she explained that some of the time, (all the time ?) I can't remember to be honest, they have to keep the door that leads to the outside play area open...something to do with regulations if my memory serves me correctly.
You may recall that it was bitterly cold last week, lowest temperature I can recall in Auckland for years in June so that's probably not a common temperature in there but what does it cost to run a couple of decent heat pumps for goodness sake ? Some of the new model heat pumps have nearly 5:1 efficiency in terms of coefficient of performance. Too much to ask for the centre to be heated adequately ? You'd be happy for your kids / grandkids to be fed cheap rice crackers pasta, rice and noodles with a bit of garnishing...basically the cheapest fillers you can provide ?
You'd be happy for your kids / grandkids to be fed cheap rice crackers pasta, rice and noodles with a bit of garnishing...basically the cheapest fillers you can provide ?[/QUOTE]
Why not ;a billion or 2 Asians do and are healthier and more productive then us. Alternative is fat and sugar laden chippies and snack bars, and 10 teaspoon sugar drinks. they are the cheapest and nastiest. I couldn't make a decision based on one persons opinion; who knows what her agenda is(losing her job maybe) and how accurate; but thanks for sharing anyway Roger.
Before Rogers rather sad post last week the EVO share price was over $1
Now it's not much more than 90 cents
Lets blame Roger for this calamity eh.
Bloody cold throughout the country today, wonder what the temp inside some of the centres are today?
Good H1 announcement ......seems all honky dory with Evolve. Share price up 14% according to headlines
Noodles always said this would come right and be a really good investment.
Wonder what noodles up to these days?
Back to its issue price of nearly a year ago. Hardly a ringing endorsement of the business model is it ! Word on the floor is many staff are still disillusioned, (those that haven't already moved on).
I understand that at this stage Noodles is not planning on coming back...another victim of...well...you know what... Couta1...I'm giving him support by e.mail and he's a 60/40 chance.
The Early Childcare space is now very (if it wasn't already) competitive. Alot of capacity has been built which is struggling to be filled.
I hear similar bad stories, including lack of oversight in PORSE
DISC: Family members directly involved in the ECE sector
4th quarter cashflows out today. It is not as strong as it should be.
The prospectus cashflow forecasts are on pg.73
http://stocknessmonster.com/news-ite...E=ASX&N=829761
Compare this to today's announcement
https://www.nzx.com/files/attachments/234476.pdf
Receipts from Customers: Actual $137200 vs IPO Forecast $137489
- On the face of it, this is pretty much in line. But when you consider the forecast did not include the 15 ECE's purchased during the year, it is a major miss.
Net cash flows from operating activities: Actual $17660 vs IPO Forecast $23095
- A big miss here. There were some acquisition and integration costs of around 2000, but there is still a major shortfall. Interesting that actual tax paid was less than forecast. This implies less profit.
Full year profit next month. Will they miss forecasts?
From June 2015 ^^^^Quote:
Originally Posted by Roger;578431 [B
What with it approaching winter and all and being out that way last evening I thought I'd pop in and see my brother and sister in law last evening after visiting my mum out that way.
After the usual pleasantries I asked her how's things at work.
Much the same she said. Most of the staff that used to work there before Evolve took over have now left.
Why's that I quizzed.
They're sick of the corporate B.S. the place has totally changed its all about profit and not about the kids anymore.
Can you give me some examples I asked.
Sure. Anything that breaks down isn't replaced, for example we had 4 ipad's now only two are working and there's no move to replace them.
Basically we have to keep the kids entertained and educated with less and less resources.
She continued on a Sunday evening at 8.30 as she was gathering up craft resources for the next day.
When it comes to art and craft resources for the kids we do it on an absolute bare minimum basis, often I supply them myself. We now have to do after hours parent events unpaid and if we refuse we're told we're not team players. (I didn't go into what's involved with after hours parent events but I am sure people can imagine there's lots of hard work public relations stuff involved).
I asked how is that not part of your normal work duties ? Good question but Evolve aren't the only ones by any means asking staff to do this sort of thing unpaid.
Speaking of bare minimum's I asked how they were getting on with heating with winter almost upon us.
Oh she said, they're supposed to be installing some new heat pumps. She continued, apparently they're required by law to maintain a minimum basic temperature so they've decided some heat pumps are the most efficient way to achieve that.
I had a quiet chuckle to myself and then asked, so when are they coming ? Apparently soon. Christmas is coming soon too I said, rather cheekily, but she replied that she was pretty confident they'd be installed soon.
Any other changes of any merit...not really she said.
Had plenty of other things to talk about so sorry, it was just a brief discussion about her work... just thought I'd update from last year FWIW
Interesting snippets of info Roger, much appreciated.
Well, that shattered my illusions about the mild weather in the winterless North - he said from a much colder, windier climate far, far away.
;)
Lordy, what is it with Edu stocks?
EVO up 4 cents or 3.8% today,however TNK was "all go" being up 9.2% or 12cents,after a good presentation.
Disc.I hold TNK.
Nicely flagged and down she goes again to the IPO level with few buyers with any interest at the close. Again not a ringing endorsement of the business model and with a wider proliferation of early childhood centres and a more fragmented approach with something of an excess supply from what I hear, one wonders if this sector is worth bothering with at all ? Thought I'd ring my sister in law for fun...yes you guessed it, on Auckland's coldest day so far this year no sign of those promised heat pumps, what a surprise. I suppose if you were being generous one might accept the view that normalised profit excluding acquisition costs of new centres did marginally exceed the IPO prospectus forecast. Mr market is underwhelmed and so am I.
Have just added this stock to my portfolio anyone else holding/following?
Yes I recently added EVO to both my wife's, and my own portfolio.
Paid 95cents ps.
Thought the agm speeches were very positive.
I am expecting eps growth to be between 11% and 13% which is slightly higher than their current PE of 10.87.The yield is also a satisfactory 5%.
Agree - I also like that Nora Barlow (ex Summerset) is the chair - growth plus income perfect combo!
She was a fantastic CEO of Summerset,and is very highly regarded in that field .She is acting CEO at EHE Estia in Australia,as well as being a board member.And that will show how skilled she is.
I still hold some SUM shares,and reaping the rewards of her ground work
Being a people type person I think she is the ideal person to be EVO's chairperson.
I also respect fellow board members Alistair Ryan who was CFO at SKC ,and CEO Alan Wham who was CEO at GXH.
The name Nora Barlow, always conjures up images of Coro Street.. and Last of the summer wine.. :-)))))
Sorry ... Will have to do some research..
I've also bought a few recently. Recent SDI gains should cover cost of corresponding expensive dental work; hopefully EVO will take care off some childcare costs and wife's ECE course :)
Wrt to Roger's reports, you always get the odd manager overeager to please the top brass... has lead to all kind of unintended historical as well as modern atrocities... If we knew which centre happy to make an anonymous tip off to NB.
If we cast our minds back a few years, those type of bad reports were the norm in retirement villages.
Once Ryman and Summerset set the standards the rest had to up their game.
Nora Barlow led by example at SUM,and I expect she brought the same leadership qualities to EVO.
I disagree,Ralph Norris,Mark Waller,Bruce Plested,Tim Glasson,Michael Hill,Kevin Hickman, Rod Duke as just a few names that come to mind.
The power of one.!!
Nice rise this week on decent volume liking this stock
Article nothing to do with Evolve - but highlights that the business model is not sustainable: corporate and shareholder greed will see to that.
http://www.smh.com.au/nsw/its-shocki...17-gsrjuq.html
As in any business if you give the customer what they want you will get what you want.
Failure to be customer focussed, your chances of staying in business are nil.
If EVO can retain being customer focussed,their prospects remain good.
It should be noted EVO's directors and CEO come from very successful customer focussed businesses.
As posted before, from inside sources that's pretty much how I have heard Evolve has been run and the results in terms of the poor share price performance since listing speak for themselves. The shares are lower than when they listed just on two years ago and in the same period of time the NZX50 is up 25% including dividends. Even taking into account dividends paid by EVO their listed performance has been poor. The child care centre I referred too in early posts finally got their heat pumps, otherwise its still being run as before. Mrs Barlow as the chair...enough said :D
There are a number of private equity firms that look to buy well, make short-term improvements in reported profitability and flip the companies based on the new, higher earnings that their "efficient management" have generated. Buying into their IPO's can be a value destroying exercise.
I'm not sure if the private equity firm in the article is operating with this model but it may be. If it is, this article says essentially nothing about the operating model of early childhood centers and everything about private equity trying to squeeze improved profitability (before flipping). With Evolve being a long-term holder it should be concerned with both short-term reported profits and issues like reputation that will impact longer-term profitability.
Also Evolve is a larger group within the sector. This should assist its centers to be slightly more profitable than your "average" center due to scale efficiencies. If the Government then funds sufficiently for modest profitability to exist, Evolves business model can generate could sustainable profitability.
Disc holder.
Said like a true investor and probably expecting / demanding higher profits year after year.
Hope not too much of these profits come from what Evolve call 'parental increases' and 'cost constraint'. We know what those terms mean eh
I sometimes wonder if the $20m of profits were reinvested back into the children's development would result in a better outcome for the children/caregivers. Or maybe some price relief would make care more affordable for caregivers.
It just seems that of the $135m of fees/income some $20m going into shareholders pockets seems rather excessive ......probably at the expense of the children/parents ........and not sustainable.
Lots of shares come out escrow next month.
Those involved say they are committed shareholders and have no intention of selling
That's good
Result must be due any day now?
"Parental increases' can't be too bad - Evolve have a NPS of +37
“Our families rave about our centres” it is said
CEO Alan Wham made a presentation at the Shareholders Association meeting last week and noodles and I had a good chance to chat to him at length afterwards. He seems a very genuine and down to earth guy, and with a heartfelt concern for the teachers and children. Nothing "private equity...flip the company" about his attitude. He did say centre managers are crucial - they are like business owner/managers - which I think is the right way to see it.
He had tremendous mentoring at 3M and a great track record with Pharmacy Brands - he took them from a small operator with $5m mcap to $170m mcap over 10 years. He sees similarities in childcare also being a fragmented sector where it's about a public service provided by professionals who are passionate about what they do.
Evolve are not going to shoot the lights out, but look pretty low risk and inexpensive to me for a well-managed company with good cashflows and steady growth prospects over several years
There are a string of great companies which investors have lost interest in for a year or two after the initial IPO hype - Collins Foods is my favourite example of many (esp on the ASX). It's the kind of irrational investor behaviour which creates opportunities.
DarkHorse,
Thank you for your post.
First impressions are solid result, will look deeper when I get more time. Good to see efficiency increase in base aquisitions.
Chief concerns at the moment are that RoE is only marginally greater than (or even less than) cost of capital. I believe the development centres will increase RoE but this remains to be seen. At the moment have valued company as no growth as I am not fully convinced that RoE>Cost of Capital
For the record I value company as around $1.40
EPS 5 cps v 4.8 Assume 10 cps for the full year, (my no growth PE is the same one Ben Grahame used 8.5), fair value 85 cps in my opinion if you believe the intangible asset valuation ?
Total Assets $210m of which $197.6m is intangible assets. (Refer to my comments in the Veritas thread for my jaundiced view of intangible assets).
Taking into account debt the net NTA is -18 cps up from -15 cps in the previous corresponding period.
Divvy yield 5% net or 6.9% gross. Disc: Don't hold.
To clarify my model is a bit more complex than a p/e.
I modelled it as no growth after the current portfolio has a full year impact + allowing for some increase in efficiency (totally reasonable I believe) and taking into account debt etc. but I have not modelled the impact of future acquisitions as I believe RoE is around about the Cost of acpital currently (hopeful this will prove to not be the case as they develop their own centres).
Happy with result I bought because I like combination of income and growth
The operational cash flow being more then $11mil negative for 6 months does not look to positive to me. Is there an acceptable explanation for this high outflow of cash?
Thanks Winner69
Welcome back Noodles, you're a man of very few words these days. Profit growth whichever number you want to hang your hat on, at least in part is coming from the hollowing out of centres in terms of providing children with the absolute bare bones basics. Based on what I have heard I wouldn't be comfortable sending one of my grandkids to an Evolve centre so the question of whether this is an ethical investment is a no brainer for me... but each to their own.
Gee - what have you geard Roger.
Sorry meant "heard"
I am comfortable that Evolve is an ethical investment for the following reasons:
-Competition is fierce in the ECE world. Parents would simply move to another centre if it was that bad. I think the opposite has happened and parents have been recommend Evolve centres to their friends. Occupancy for the core 84 centres has increased since Evolve took over (by 1 %).
- Evolve undertakes customer surveys. They have a net promoter store of 37
-Teacher ratios are well above government standard.
- The ERO does reviews of the centre. Most ECE are on a 3 year review (good). A few are on 4 (very good). So no issue from the ERO.
- The pay rates for teachers are slightly above the sector average
Have a read from the start of the thread mate.
Noodles, What I have reported is a exceptionally good early childhood centre morphing into a corporatized centre and feedback was from a senior employee that I am related too and hold in very high regard. This was in an area where parents are able to afford the very best for their kids and to be fair may not necessarily be representative of the changes an average privately owned childcare centre would experience changing into a corporatized model. The reality for logistical reasons is I think most parents just take what they can get in their local area and changes in EVO's occupancy could be as much to do with demographic factors including the rapid influx of migrants as anything else. You absolutely loved Veritas at one stage it was your top pick. I made the argument that those sort of business's are poorly suited to the corporate model. Corporatizing bars and food outlets hasn't worked and that is a company choc-a-bloc full of intangible assets too.
Two of my extended family have been involved in the sector for over 20 years each. From their observations profitability in this sector can be materially affected by a shift in government policies. Can you think of a recent reason why the Government purse strings might be dramatically tighter in the years ahead ?
Its not for me and the SP has been most underwhelming since listing but good luck to all, I will leave holders in peace now :)
It's good to hear different points of view Roger, but in my view those above tend to be either too narrow or a bit too broad.
I'd prefer to look at metrics and reports across all centres than just feedback on one. Even the ABs lose sometimes, and even the best corporate with a large number of branches will have the odd poor performer, while some - but certainly not all - small owner operators are outstanding.
We have several options here for our kids and like most parents wouldn't hesitate to change if the service was poor.
Roger, how many of your holdings have high tangible asset backing? (excluding property and infrastructure companies of course)
How do you foresee a future National or Labour government changing policy? (remembering encouraging mothers to work increases the tax take)
One ongoing trend in most sectors is ever-increasing regulation around health and safety, HR etc etc, driving up fixed costs and making it very hard for small operators to compete as economies of scale become ever important.
Some private operators - eg kidicorp - have made made great profits; others will have poor returns. It will come down to management. I'm fairly neutral on the sector, but see value here as long as management is doing a great job.
Having thrown toys around, cried for no apparent reason and then gone to sleep for a while I have now, with the aide of my financial calculator,
http://thumbs1.ebaystatic.com/d/l225...7XNxdVYyGA.jpg
valued Evolve.
So current (21-Nov-16) value: $1.174
end of year (31-Mar-17) value: $1.197
one year out (21-Nov-17) value: $1.239
All on the assumption that they do not go overboard on buying more kindies.
Best Wishes
Paper Tiger
Disclaimers:
Do Your Own Research,
Valuations will change as information comes to light,
I want a biscuit, now.
10-10.5%, my spreadsheet says WACC is 10.1%, although proportion of debt will have changed by now. Keep in mind that their profitability will very likely increase without any further investment as we get full year impact and efficiency increases for the first few years of center acquisition.
I recall drilling down to the acquisitions of centres and it seemed like return on investment would only be around 10% even after allowing for some increase in profitability.
I do think that the centres developed by evolve have the potential to deliver very attractive returns on investment though.