3P Learning Limited

3PL Details

Change in Directors’ Interest: 3P Learning Limited (ASX:3PL) is engaged in the development, sales and marketing of educational software and ebooks to schools and to parents of school-aged students, delivered via a software-as-a-service subscription mode. Recently, Allan James Brackin has made a change to holdings in the company by acquiring 72,895 fully paid ordinary shares at the consideration of $107,393.03.

Acquisition of Writing Skills Programs: As announced on 10 November 2021, the company finished acquisition of a suite of writing skills programs from Inspirity Pte Ltd and Skoolbo Australia Pty Ltd at the consideration $2.5 million.

• The acquisition was financed through cash reserves of the business.
• As a result of the acquisition, the company is equipped with a platform to develop an innovative writing skills program suite with a planned release in Q1FY23.

FY21 Financial Highlights:

• For the year ended 30 June 2021, the company recorded revenue amounting to $57.4 million as compared to $55.0 million in FY20. In addition, revenue growth from licence sales rose by 4% to $53.8 million.
• Underlying Net Profit After Tax for the year amounted to $2.2 million against $0.6 million in FY20.
• During the year, 3PL acquired 100% stake in Blake eLearning Pty Ltd and its controlled entities for the total consideration transferred of $182,221,000.

Key Risks:

• Stiff Competition: The company’s operational and financial performance could be impacted by the rising market share of competitors, which could materially impact its topline and the bottom line.
• Regulatory Risk: 3PL is exposed to a more complex regulatory environment; any failure in the compliances could lead the business to fines, penalties, etc.

Outlook:

• For FY22, the company expects to report revenue in the range of $92.3 million - $97.2 million and EBITDA of between $12.1 million - $15.4 million.
• 3PL anticipates single digit growth on the core school market, underpinned by the closure of one or more seven-figure enterprise sales opportunities.

Valuation Methodology: P/E 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 3PL is trading near to its 52-week high level of $1.695. The stock has provided returns of ~17.77% and ~39.09% in the past one month and three months, respectively. The stock has a support and resistance level of $1.40 and $1.76, respectively. The stock has been valued using a P/E multiple-based illustrative relative valuation and arrived at a target price with a correction of high-single-digit (in % terms). The company can trade at a slight premium to its peers’ average P/E multiple, considering the synergies from the recent acquisitions, and growing earnings, etc. For the purpose of valuation, peers such as IDP Education Ltd (ASX: IEL), G8 Education Ltd (ASX: GEM), and Mayfield Childcare Ltd (ASX: MFD) have been considered. Considering the expected correction in the valuation, solid rally in the past months, current trading level, and key risks associated with the business, we suggest investors to book profit and give a ‘Sell’ rating on the stock at the current market price of $1.690 as on 22 December 2021, 1:10 PM (GMT+10), Sydney, Eastern Australia.

3PL 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 for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

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