iCollege Limited

ICT Details

iCollege Limited (ASX: ICT) is a leading vocational training provider, providing vocational education and training solutions throughout Australia and internationally. The market capitalisation of the company, as on 2^nd July 2021, stood at ~$69.78 million.

Q3FY21 Update:

The company reported Q3FY21 revenue of $4.55 million, an increase of 51.9% on the previous corresponding quarter,  driven primarily by the domestic student business which is performing strongly, demonstrated by increases in student numbers for existing qualifications and early interest in new course offerings. Operating EBITDA during the quarter period stood at $1.02 million.  The period witnessed strong progress in Aegis and Pharmacy Guild contracts where till date, over 1,360 have attended training. The  cash balance at the end of the period stood at $5.17 million.

Key Data (Source: Company Reports)

Recent Update:

The company, on 28 June 2021, informed the ASX that it entered into an indicative, non-binding term sheet in respect of its Off-Market Takeover Offer for RedHill Education Limited (RedHill) (ASX: RDH) shares. Subject to satisfaction with the findings of due diligence, ICT has agreed to an increase in the share exchange ratio for iCollege’s Off-Market Takeover Offer from 7.6 to 9.5 iCollege shares for each RedHill share.

Outlook:

The company is well-placed for the remainder of FY21 and expects to deliver its highest full year revenue and earnings since the listing of iCollege. It’s continued growth is underpinned by the expansion of domestic course delivery throughout Australia. Significant government subsidies have enabled the management of the company to expand its focus to include traineeships and apprenticeships. It is actively pursuing expansion opportunities through potential acquisitions.

Key Risks:

Any further restrictions on the travel ban and international border closure might have an impact on overseas student enrolments which contributes 47% of total revenue.

Technical Overview:

Weekly Chart –

Source: REFINITIV

Note: Purple colour lines are Bollinger Bands® with the upper band suggesting overbought status while the lower band oversold status, and yellow lines are Fibonacci retracement lines which measure price rebound and backtrack. https://www.bollingerbands.com/

While experiencing good volatility, the stock has given a higher closing for the ongoing week at $0.115. The technical indicator RSI with a reading around 49 and a curve at the end pointing up, suggests gaining of bullish momentum.

Going forward, the stock may have resistance around the 23.6% retracement level of $0.137 whereas support could be around the 50% retracement level of $1.000.

Stock Recommendation:

The company’s EBITDA Margin and Net Margin for H1FY21 stood at 22.7% and 13.9%, better than the H1FY20 result of 9.6% and -1.5%, respectively. The current ratio for H1FY21 stood at 1.13x, better than the H1FY20 result of 0.26x, implying that the company possesses better capabilities to meet its short-term obligations.

Considering the aforesaid facts and current trading levels, we give a ‘Speculative Buy” rating on the stock at the current market price of $0.115 per share, down by 4.167% on 2^nd July 2021.

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined:-

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

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