Kip Mcgrath Education Centres Limited ("KME")

[steve fleming]

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#