IDP Education Limited
IEL Details
This report is an updated version of the report published on the 10 May 2022 at 2:44 PM GMT.
H1FY22 Financial Highlights: IDP Education Limited (ASX: IEL) is engaged in the placement of international students into educational institutions in Australia, the UK, the US, Canada, New Zealand, and Ireland.
- Record-Breaking Revenue: Total revenue stood at $397 million, delivering highest half-year revenue ever registered by IEL. IELTS volumes surged by 79%, with growth registered across most geographical regions where IDP administers the test.
- Outperforming KPIs: Digital marketing revenue surged by 13% and stood at $20 million as the company’s international clients turned to IEL to leverage its rebound strategies. The company is betting on digital transformation program for IELTS and student placement, with downloads of IDP Live App clocking 500k.
- Corporate Update: Successful integration of the British Council’s IELTS program and a 36% increase in Student Placement revenue highlights favourable growth prospects. The ongoing digitalization for student placement and IELTS has delivered a competitive edge.
- Bottom Line: EBIT was registered at $77.9 million, up by 61% PcP, and EBITDA stood at $96.6 million, up by 43% PcP. The bottom line remained in line with revenue growth and almost constant non-cash charges.
H1FY22 Financial Snapshot; Analysis by Kalkine Group
Key Risks and Challenges
With international operations in place, the company confronts high regulatory, competition and currency risk in the global education industry. COVID-19 related uncertainties further aggravate the associated risks.
Outlook
IEL has expanded its footprint in India with 74 paper-based test locations and 37 computer-delivered centres. Complementary expansion of student placement network stood with launch of 27 new Indian offices so far in FY22.
Valuation Methodology: Price to Earnings Multiple Based Relative Valuation (Illustrative)
Source: Analysis by Kalkine Group
*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock’s historical trading multiples versus peer average/median, and investment risks.
Stock Recommendation: The stock of IEL gave a negative return of ~12.39% in the previous month. The stock is currently trading lower than the 52-weeks average price level band of $20.170 - $40.260. The stock has been valued using the Price-to-Earnings multiple-based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in percentage terms). Considering the decent growth in IELTS, raising app usage, the company might trade at some premium to its peers. For valuation, few peers like G8 Education Ltd (ASX: GEM), iCollege Ltd (ASX: ICT), 3P Learning Ltd (ASX: 3PL), and others have been considered. Given the decent fundamentals, expansion via Indian acquisitions, optimistic long-term outlook, current trading levels, and upside indicated by valuation, we give a “Buy” recommendation on the stock at the current market price of $23.630, as of 10 May 2022, at 10:30 AM (GMT+10), Sydney, Eastern Australia.
Markets are currently trading in a highly volatile zone due to certain macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.
IEL Daily Technical Chart, Data Source: REFINITIV
Note 1: The reference data in this report has been partly sourced from REFINITIV.
Note 2: Investment decisions should depend on the investors’ appetite for upside potential, risks, holding duration, and previous holdings. Investors can consider exiting the stock if the Target Price mentioned as per the Valuation has been achieved and is subject to the factors discussed above.
Technical Indicators Defined: -
Support: A level where-in the stock prices tend to find support if they are falling, and a 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.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
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