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  1. #1
    ? steve fleming's Avatar
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    Default Kip Mcgrath Education Centres Limited ("KME")

    KME looks pretty cheap given strong growth and earnings outlook on the back of successful restructuring initiatives, business expansion and positive commentary from Directors:
    “The company is budgeting an increased profit in FY 2014 with increased revenue from the major initiatives”.

    $6.6m m/c + $1.2m net debt = $7.8m EV ; so with FY13 EBITDA at $1.2m = 6.5x FY13 EBITDA. [say compared to RDH trading at 14 x FY13 EBITDA]

    Paying down bank debt from their strong surplus cash with all convertible notes now converted, so only $2.2m in bank debt remains (annual saving of $150k in interest).
    Net debt of $1.2m now represents approx 1x EBITDA.

    Given the royalty model, KME just need to sit back and collect the $’s for the bulk of their revenues (as well as provide a few services!)….will also benefit from a declining AUD

    Management expect the high margin on-line tutoring services to scale up to contribute 15% of total revenues over the next 3 years and 50% over 5 years

    http://www.dailytelegraph.com.au/new...-1226758113220

    http://www.theaustralian.com.au/tech...1226754533535#
    Last edited by steve fleming; 06-12-2013 at 07:55 PM.
    Share prices follow earnings....buy EPS growth!!



  2. #2
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    HI Steve,
    I have 50000 of these purchased recently but it took like 2 weeks to get them the liquidity is terrible. Anyway happy to hold.

  3. #3
    ? steve fleming's Avatar
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    Quote Originally Posted by stoploss View Post
    HI Steve,
    I have 50000 of these purchased recently but it took like 2 weeks to get them the liquidity is terrible. Anyway happy to hold.
    Hi SL
    good to know there are others on board!

    There is actually an ice-berg seller at 15c/16c, keeps on reloading....I have been trying to fight it this week, but now have 300,000 and am out of ammo

    so there is an opportunity at the moment to get in at around 15c/16c
    Share prices follow earnings....buy EPS growth!!



  4. #4
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    Quote Originally Posted by steve fleming View Post
    Hi SL
    good to know there are others on board!

    There is actually an ice-berg seller at 15c/16c, keeps on reloading....I have been trying to fight it this week, but now have 300,000 and am out of ammo

    so there is an opportunity at the moment to get in at around 15c/16c
    OK Thanks Steve, keep you posted

  5. #5
    Corporate
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    It looks to me like there are no sellers ( at least in the off market depth)? Might be hard to get any at 15c..

    Looks like a good buy if you can get some.

  6. #6
    ? steve fleming's Avatar
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    Quote Originally Posted by Corporate View Post
    It looks to me like there are no sellers ( at least in the off market depth)? Might be hard to get any at 15c..

    Looks like a good buy if you can get some.
    At close on Friday the seller had from memory about 90k at 15c and 80k at 16c (disclosed).....it always withdraws its offer at end of day....has been doing that for the last couple of weeks....should be back on Monday morning

    I picked up 300k in a number of transactions, and each time the seller automatically reloaded as soon as I bought....so don't know how big the 'iceberg' is
    Share prices follow earnings....buy EPS growth!!



  7. #7
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    My daughter goes to Kips and we're very pleased with the change in her attitude to maths and the methods they teach to help her improve her ability. The place is always full of kids so there's no issue with take-up of "The Product". For my ten cents I'd say this is a good company, employing good people and delivering the goods as far as I can see.

    KME is a stock I'll definitely be looking into.

  8. #8
    born2invest
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    It is so up and down and unpredictable.

    The only thing is has going for it is it's revenues have increased. Everything else (profits, ROA, ROE, margins, etc are fairly poor).

    My sister used to go here when she was younger and for the near monopoly they have in NZ for their services, I would have thought the business would be thriving, but it has just muddled along for years.

    I understand people are using the Peter Lynch type model "my daughter/son goes here and I pay so much money per hour, etc, etc"' but you really have to look at the margins and ROE to see that even with their monopoly type status and branding, they still aren't doing overly well.

  9. #9
    ? steve fleming's Avatar
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    Lets look at performance since 2011 when they sold their higher education business, and decided to focus on their tutoring business only, naturally if you sell a part of your business, revenues will fall. So lets look at some key metrics for the subsequent years : FY11, FY12 and FY13
     
    FY11
    FY12
    FY 13
    Revenue (m)
    6.435
    7.912
    9.644
    EBITDA (m)
    -0.098
    0.842
    1.172
           
    EBITDA margin (%)
    -2%
    11%
    12%
           
    rev growth %
     
    23%
    22%
    EBITDA growth %
       
    39%
           
    Cash flow from ops
    0.129
    0.533
    0.904
    CF growth %
     
    313%
    70%
    The revenue, EBITDA and CF growth looks pretty compelling to me

    This is since they have undertaken a series of initiatives to improve their online/cloud service offerings, and more importantly, focused on expanding those franchises that pay a franchise fee as a % of student fees (up to 20%), rather than a fixed fee. Post year end , they have rolled out further online offerings, plus their tie up with google

    In these types of plays, you have to put a bit more effort to understanding the story.
    Share prices follow earnings....buy EPS growth!!



  10. #10
    ? steve fleming's Avatar
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    Quote Originally Posted by steve fleming View Post
    At close on Friday the seller had from memory about 90k at 15c and 80k at 16c (disclosed).....it always withdraws its offer at end of day....has been doing that for the last couple of weeks....should be back on Monday morning
    So the 90k order from Friday is now moved up to 18c….the seller wants out, so I still think he will come back down to 15c.
    Share prices follow earnings....buy EPS growth!!



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