EVO - Evolve Education

[golden city]

It will break 20c tomorrow

[Scrunch]

It will break 20c tomorrow

The AU listing chart shows some traded volume at 19c and a high of 19.5 (but this could have been on minimal volume). Both of these are consistent with over 20c NZ.

[Snow Leopard]

Buying another 5 Oz kindies. Funding with a mix of cash & new shares.

I was hoping that the SP was going to retreat some more and these seems to have at least delayed that.

[golden city]

Let’s see if this time go over 20s

[Scrunch]

Buying another 5 Oz kindies. Funding with a mix of cash & new shares.

I was hoping that the SP was going to retreat some more and these seems to have at least delayed that.

So my take on it - Five centres with what appears to be good profitability, but possibly more importantly, an increased ability to scale by using EVO equity.

The deal adds A$1.8m of historical earnings on the purchase price/EBIT ratio referenced. Presumably there is a realistic chance of A$2.5m EBIT looking forward as this is where the earnings earnout threshold has been set. Assuming its achieved, the cost has been $4m cash and 34m additional shares. Allowing for 30% tax, the earnings from the centres will repay the purchase price in two and a quarter years. Can't grumble about that.

The rights raising noted NZ$25 for expansion (A$24m was quoted but its A$23.3m @ current exchange rates of 0.933). The 8 Oct announcement used A$11.8m. This deal increases the cash spend to A$15.8m. This indicates there's still another A$7.5m in the expansion kitty. This could achieve another similar deal, or possibly two if vendors accept EVO shares.

The rights issue doc's stated a goal of achieving NZ$5-6m of incremental EBITDA from Australian acquisitions. The Oct deal was +A$2.5m and this circa +A$1.8m to A$2.5m. This indicates the bottom end of this range has potentially been hit before any further deals.

Disc holding

[Beagle]

The key question of how to turn around the woeful performance of their N.Z. centres, (which still forms the vast majority of their business model), remains completely unanswered. For mine that is the key, bolt on acquisitions are easy meat, like shooting fish in a barrel, fixing systemic issues in N.Z. are not.

[golden city]

I think they already have a plan in mind with their experiences should have answer very soon end of the month I think

[WAIKEN]

Once directors have real skin in the game they perform. The previous board were woeful and are all gone except Norah Barlow who goes soon. Findlay had the only real shareholding and gave up the ghost selling out to Scott. Scott and Sacre know the game. They will keep adding Aus preschools
with positive EBITDAs. They pay premium wages, provide premium conditions. Happy staff = Happy kids = Happy parents = profit. A simple formula.
In NZ the non core businesses are gone. Underperforming preschools have been disposed of. I assume a few more will be sold. The remaining ones will be upgraded and staff wages and conditions improved.
Once NZ is fixed I predict an NZ profit of 15-20 mill for 31.3.21 plus an Aus NZD profit of 15-20mill.
A 30mill profit with 1Billion shares is 3cps - On a PE of 10 = 0.30 price A PE of 15 =0.45
With expansion through cheap debt and share issues at an improving sp I predict 1.00 in 3 years time.

[Beagle]

There is a systemic issue with ongoing growth in the numbers of childcare centres in N.Z. leading to years of declines in the occupancy rate of existing centres.
Turning around the long established declining trend in occupancy rates, (if they can do it), will be key to stopping the ongoing decline in N.Z. profitability.
To date my sources tell me there is no sign of a cohesive plan to achieve this. I am highly sceptical we will see any meaningful progress on N.Z. profitability, (still the vast majority of their business model), for quite some time.

[WAIKEN]

This is not the old board at the helm. The new board are moving rapidly and meaningfully. I predict we will be looking at a much improved company when we receive the 6 mthly in Nov 2020.