Navitas Limited

Trading at 52-week High Level: Navitas Limited (ASX: NVT) is a leading global education provider that has helped generations of learners transform their lives through education. The company delivers an extensive range of educational services to over 70,000 aspirational students across the global network at 120 colleges as well as campuses in 24 countries each year.

The company has recently announced that they have signed an agreement with Lancaster University in assisting them to establish and operate a new managed campus in Leipzig, in Germany.
 

1HFY19 Financial Summary (Source: Company Reports)

On the financial metrics front, the operating cash flow per share stood at 10.5 cents in the half-year ended December 2018 compared to 11.5 cents in the prior corresponding period, a decrease by ~9.0%.The operating cash flow was $37.5 million in the half year ended 31 December 2018 and was primarily impacted by the costs of closing discontinued businesses.

The group EBITDA stood at $49.8 million for the half-year ended 31 December 2018 compared to $66.7 million in the previous corresponding period, down by 25.0% Y-o-Y. EBITDA margins stood at 21% in the half year ended December 2018 and was impacted deployments towards the sales transformation program as well as additional teaching staff.

Moreover, the company’s net margin is lower than the industry median which could be a cause of concern. NVT’s net margin stood at -5.1% while the industry median stood at 30.2%.

What to Expect From NVT: The company stated that it did not declare an interim dividend in the 6 months ended December 31, 2018. Moreover, the company stated that there are expectations that global demand would grow amidst uncertainties in some of the markets.

Therefore, moving forward, the company’s lower net margins as compared to the industry median might impact the sentiments of the investors. Also, the stock is almost trading near its 52-week high.Therefore, we presume that all the positives catalyst is discounted into the current market price of $5.61, hence we recommend a “Sell” rating on the stock.
 

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