In today’s daily we have covered stock research on NAVITAS (Expensive).









 
The S&P 500 was up by 26.75 points or 1.34%on Friday to 2019.42 points.  U.S. stocks rallied on Friday after five sessions of losses,helped by a sharp rebound in energy shares and data that signaled the U.S. economy was on track for solid growth. U.S. consumer sentiment hit its highest in 11 years in January, while factory output rose last month, reports showed. The Dow Jones industrial average. The Dow Jones industrial average rose 190.86 points, or 1.1 percent, to 17,511.57, the S&P 500 gained 26.75 points, or 1.34 percent, to 2,019.42 and the Nasdaq Composite added 63.56 points, or 1.39 percent, to 4,634.38.

Among the biggest energy gainers, shares of Schlumberger Ltd  the world's No. 1 oilfield services provider, jumped 6.1 percent to $81.33 after it said the oil price drop was likely to have a "significantly more dramatic" impact on North America than on the rest of the world. Schlumberger derives two-thirds of its revenue from operations outside North America.All 10 of the S&P 500 sectors ended higher, though energy   led the charge, rising 3.2 percent. U.S. crude oil futures settled up 5.3 percent after the International Energy Agency forecast the market downtrend would end. Brent gained 3.9 percent. 



S&P 500 Daily Chart (Source – Thomson Reuters)
S&P ASX 200was down by32.13points or 0.60%on Friday and closed at 5299.24 points. For the week Newcrest Mining rose 6.49 per cent to $12.97 and Northern Star Resources climbed 16.18 per cent to $1.98. But Rio Tinto fell 9.3 per cent to $53.89, while main rival BHP Billiton was down 7.24 per cent to $27.05. The big four banks fell in every ­session in the week except for Westpac, which rose on one day.
Commonwealth Bank of Australiafell 2.9 per cent over the week to $83.57, while Westpac Banking Corporation fell 1.9 per cent to $32.76, ANZ Banking Group dropped 3.5 per cent to $31.26 and National Australia Bank fell 2.5 per cent to $33.37. SPI futures closed up 76 points to 5307 on Saturday morning. CSL suffered a 3.8 per cent tumble on Friday to $83, after the US national health institute flagged this season’s flu vaccines were not as effective. Over the week, the stock fell 4.7 per cent.

Northern Star Resources Daily Chart  (Source – Thomson Reuters)
 
Top Performers on the ASX 200 were :-


 
 
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Stock of the Day - NAVITAS (Expensive)

At its annual general meeting or AGM, Navitas said it remains on track to deliver AUD 162 million to AUD 172 million earnings before interests, tax depreciation and amortization or EBITDA in fiscal 2015. This is a strong increase on the AUD145 million achieved in the fiscal 2014 and reflects the continued growth in the student numbers, improved performance from the SAE creative media education business and the U.S university program becoming profitable.


Navitas Finacial Highlights (Source - Company Reports)

We like the long term outlook for Navitas and think it will continue to benefit from the growth in demand for tertiary education, particularly from developing countries in Asia. Historically the company has done a great job in building and maintaining strong relationships with universities and marketing agents. The recent investor day provided us with confidence that it will continue to grow and strengthen these relationships that help Navitas build a sustainable business.


Navitas Strategy (Source - company Reports)
It is also very clear that the company avoids lower value and less profitable parts of the education markets where it believe s there is a reputational risk. However the education sector remains very competitive and with the ability of the universities to offer their own pathway courses, we do not believe that strong relationships constitute a competitive advantage. We also believe that there are ongoing regulatory risks.

Navitas Daily Chart (Source - Thomson Reuters)

However we think it is highly unlikely that many universities will follow the path of Macquarie University, to take its pathway courses in house, given Navitas’ expertise in running these courses. Northern hemisphere third semester 2014 University programs student enrolment numbers support the expectation for strong earnings growth in fiscal 2015. We like the Navitas story but believe the stock is expensive at the current price and would review the stock at a later date.
 

 
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