EVO Details

H1FY21 Results Update: Evolve Education Group Ltd (ASX: EVO) provides early childhood education services in New Zealand. EVO posted healthy revenues for six months ending June 2021 with 21% growth reaching NZ$74.89 million. Due to seasonality patterns and public holidays, EVO witnessed sharp contraction in underlying EBITDA from NZ$10.04 million in H1FY20 to NZ$5.46 million in H1FY21.

EVO now operates about 111 early education centres covering NZ and 21 in Australia. The company is pursuing inorganic growth to deepen its stronghold in Australia. As per the trading update, it had posted healthy occupancy rate of 84% in Australia and 68% in New Zealand.

Recent Update:  On 2^nd Augusts 2021, EVO announced that its NZ COO Craig Presland has decided to leave the company. In the interim, Chris Scott and Edmud Mah will oversee the NZ operations.

Key Risks and Challenges:

EVO is exposed to seasonality risk with nil grants during public holidays. Restrictions on movement and lockdown protocol may hamper the operations and affect the enrollment and occupancy rate.

Outlook:

The company is expecting full-year FY21 underlying EBITDA in the range of NZ$16-18.5 million and FY22 estimate of NZ$23-25 million.

Stock Recommendation

The stock delivered 3 months returns of ~+19.73%. It is currently trading lower than the average of 52-week high and low of A$1.480 and A$0.570, respectively. There were nil dividends distributed during the year. Considering the current trading levels, recent rally in share price, positive momentum in businesses following the easing of restrictions, surge in H1FY21 revenues, and key risks associated with the businesses, we suggest investors to book profits at the current levels and give a 'Sell' rating on the stock at the current market price of $0.895, as on 1:13 PM (GMT+10), Sydney, Eastern Australia, as of 2nd November 2021. 

EVO 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 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.

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