IDP Education Limited

ASX:IEL

IDP Education Limited

ASX:IEL
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$11.49 (-0.6%)
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#46
Rank
22
Held by
33
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Reports (4) My Report Forum Investors
Forum Topics IEL IEL ASX Announcements

Pinned straw:
mikebrisy
Added 7 months ago

$IEL offered the following "market and regualtory update" this morning.

Key Messages

A more restrictive policy environment in IDP’s key destination countries is reducing the size of the international student market

• This has negatively impacted IELTS testing and student placement volumes during H2 FY24

• For FY24 IDP expects a 15-20% increase in student placement volumes, a 15-20% decline in IELTS volumes and solid average fee growth versus FY23

• Adjusted EBIT for FY24 is expected to be broadly in-line with FY231

• Given the current policy settings and market trends, IDP expects that the size of the international education market will decline by 20-25% over the next twelve months2

• In response, IDP is implementing a cost reduction program that is designed to align expenses to the near-term revenue outlook

• As the leading quality player in the sector, IDP remains very well placed to help students and institutions navigate these challenging market conditions and expects to grow its market share in student placement

• Despite the shorter dated cyclical dynamics, IDP remains confident in the long-term growth drivers for the industry

• IDP is strongly leveraged to the powerful long-term macro forces that will underpin the sector’s return to sustainable growth and is executing on a strategy to create a unique offering for students seeking a better life through international education


My Analysis

TBH, this was somewhat worse than I was expecting. However, it is worth pointing out that the SP is already trading at -25% to the consensus target. Thus, reporting that FY24 EBIT is expected to be in line with FY23 is not that bad, and puts the result less than 5% below consensus.

As expected, conditions in FY25 will continue to deteriorate, so $IEL are positioning themselves for this.

From my perspective, the thesis is intact. No idea how the market will respond, but a lot of bad news is already baked in, in my view.

Disc: Held in RL and SM
Solvetheriddle
Added 7 months ago

I usually don't watch the shorts that much, but am interested in this case due to the size of the shorts and their reaction to any new info.

i feel that as uncertainty reduces shorts will feel more vulnerable, they require more bad news, not stabilisation, even if that stabilisation is lower than expected.

i note the first release i can see is the short covering of 6m shares. of course, these guys can turn on a dime but they have to cover at some point.

we shall see

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13
Rick
Added 7 months ago

@Solvetheriddle I’ve been keeping a regular watch on the shorts for IEL. It’s interesting to note that on the 3rd June the number of short positions for IEL dropped 4.3% in one day, down to 12.8%. This was prior to the ASX market update. Shortman.com.au is always 4 days behind. It will be interesting to keep an eye on the chart over the coming weeks. The 5.65% lift in the share price on Friday (7 June) might be a sign of more short sellers covering positions?

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Solvetheriddle
Added 7 months ago

The much-anticipated shoe dropped at IEL and a bit worse than i had expected. main points,

  1. To buy the stock must believe this is cyclical and ST/MT
  2. must believe that IEL maintains a leadership position in a healthy growing industry, so maintaining high PE that is synonymous with a growth biz
  3. are we out of the woods? not clear, fy25 still tough, some chance of another leg down, but this risk is reducing, imo
  4. happy they are moving on costs, historically this has surprised on the upside. i had feared the new mgt would baulk at this.
  5. US making progress, i thought this market was too tough. some positive mix effects coming.
  6. my new buy price is $13.60 assuming you are on board with the above

the below shows the over-earning with the huge student vols around 2023, and my assumptions on contraction and recovery. to give the above share price buy target 10%pa over the next 5 years.

i hold this but have plenty of room to increase it

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19
RhinoInvestor
Added 7 months ago

Just had a read of the announcement as well. The bright spot is the increase in placements which are the much higher revenue side of the business. I'd suggest that maybe a way to look through this is that if you really want a place when there are restricted numbers (i.e. more competition for the place) then its going to be much more important to engage a high quality placement company to help you secure one. As IDP seems to note, potentially a tailwind for them which can offset some of the decline in total market for the next couple of years as they take market share from less reputable competitors.

I'm going to try to attend the call at 10am and will also be really interested to see how the market reacts. Further downward pressure on the share price may present an even better buying opportunity if you have the temperament to ride out a couple of tough upcoming years.

DISC: Held IRL and SM

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