G8 EDUCATION LIMITED (ASX: GEM)
Up 6.85% on May 03, 2018, GEM seemed to have regained the lost momentum in stock price with its recent presentation made to Macquarie Conference. The group is now aiming to focus on four key strategic priorities to manage occupany related headwinds and drive a turnaround while leveraging positive industry dynamics. GEM is Australia’s largest for-profit early education provider having a network of around 500 centres across the country and increasing cash flow through operating cost and capital allocation discipline. While group’s like for like occupancy has been indicated to be down circa 2.5 to 3% so far in 2018, GEM has indicated to have a striking pipeline of 40 centres in the next 2 years. The group expects boost from Female labour force participation, early education benefits, and Government funding which is expected to increase under new scheme by c.16% to c.$8bn.
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Strategic Objectives (Source: Company Reports)
Group’s prior year acquisitions continue to grow occupancy and will yield earnings in line with expectations for the full year. The group will provide more insights during its half year result due in August 2018. Given the update, we have a hold on the stock at the current market price.
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