IDP Education Limited

FY19 Financial Performance (as at 30 June 2019): IDP Education Limited (ASX: IEL) is in the business of providing education services and has a market capitalisation of ~A$3.99 billion as on October 10, 2019. With respect to the financial year ended June 30, 2019, interim dividend amounting to 12.0 cents per share (franked at 50%) was paid on March 29, 2019. Additionally, it was stated that the final dividend amounting to 7.5 cents per share (franked at 45%) was declared on August 21, 2019, which was payable on September 26, 2019 to the shareholders, who registered on September 10, 2019. The performance of IDP in FY19 reflects the continuation of robust organic growth that it has been witnessing over the past 7 years. The growth was supported by ongoing global growth in the international education industry and central role of English as a key global language. The company has a global footprint and diversified business model, which benefits from global trends. The company’s total Revenue amounted to A$598.1 million in FY19, which reflects a rise of 22.8% on a YoY basis. Its NPAT stood at A$66.3 million, implying an increase of 28.8% on a YoY basis.


Financial Performance (Source: Company Reports)

Region-wise Financial Summary:
Asia:Asia posted a robust year of growth and it continued to be the primary driver of the company’s profitability with 73% of group EBIT coming from the region. The region includes both India and China, which are the primary engines of growth for international education industry.

Australasia:The performance of the Australasian segment showed signs of improvement during the year. The segment has witnessed a decline in earnings for the last 4 years with the competition in English language testing market reducing the IELTS volumes in ANZ (or Australia and New Zealand).

Rest of World:Rest of World recorded a decent performance for the year and Middle East, Canada, Nigeria and the UK supported the growth in the segment. The Middle East’s underlying performance was because of robust IELTS volume growth and the total test volumes throughout the region were up.

Outlook:The company is introducing a net promoter score system across key touchpoints in order to support its focus towards delivering superior customer service. In 1H of financial year, the company would be rolling out Digital Campus in Chennai. This would be bringing together 400 of the digital marketing, design as well as technical resources, allowing the rapid product development and customer-centric innovation. The company would continue to expand client services so that it can provide data-driven insights and marketing solutions via IDP Connect.

Stock Recommendation: The total revenues of IDP Education Limited has witnessed a CAGR growth of 17.87% in the time span of previous FY 2015- FY 2019 and, thus, it can be said that IEL is possessing respectable capabilities to garner revenues which might support its long-term growth prospects. The company’s net margin stood at 11.1% in FY19, which implies an improvement from FY18 figure of 10.6% and, thus, it can be said that the company’s capabilities to convert its top-line into the bottom-line have improved. IEL’s current ratio stood at 1.31x in FY19, an improvement from FY18 figure of 1.02x. Currently, the stock is trading towards the upper band of the 52-week trading range of $8.45-$19.84 with higher PE multiple of 59.75x. Hence, considering the aforesaid facts and current trading levels, we have a watch view on the stock at the current market price of $15.470 (down 1.402% on 10 October 2019), and suggest investors to wait for better entry levels.

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