G8 Education Ltd.’s (ASX: GEM)

G8 Education Ltd.’s (ASX: GEM) stock plunged 7.9% on February 26, 2018, with the release of the FY 2017 result wherein the child care operator’s revenue was up 2.4% to $795.8m with underlying Earnings Before Interest and Tax rise of 2.2% to $156.0m after adjusting for LDCPDP funding. GEM’s underlying Net Profit after Tax of $92.9m, was flat and in line with pcp; however, underlying Earnings per share of 21.8 cents was down 11.7% owing to placement of 31 million shares during the period to raise $100 million. GEM also witnessed some stability in occupancy during January, with improvement in committed forward bookings. While the market conditions were challenging with continued weak demand growth having an impact on occupancy levels otherwise, the group now expects a rise in demand with the increased Government funding due to commence in July 2018.

GEM believes that its balance sheet position, national network, committed acquisition pipeline, and top quality executive leadership team in place, will enable the group witness better earnings in 2018 and beyond. While the stock looks oversold at the moment and concerns are emanating on dividend for FY19 based on requirement of better profitability per share, we give a “Hold” recommendation at the current price of $2.90


Performance Highlights (Source: Company Reports)

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