Consensus community valuation
$0.450
Average Intrinsic Value
28.6%
Undervalued by
Active Member Straws
#Market Size
Last edited 5 days ago

Janison has put FY25 guidance as shown in the attachment below. They aim to get $110M in Assessments segment and $40M in Learning. 

The assumptions for Assessment business are:

  1. Schools 
    • 50m participants, on average students take 4 tests annually giving 200m total tests for the year. Attaching an average revenue per test at $1 give market size of $200m. Janison believe they can capture 10% of the market giving target market od $20m 
  2. Language 
    • 40m participants, on average students take 1 test annually giving 40m total tests for the year. Attaching an average revenue per test at $7.50 give market size of $300m. Janison believe they can capture 10% of the market giving target market od $30m
  3. Higher Education 
    • 2.5m participants, on average students take 4 tests annually giving 10m total tests for the year. Attaching an average revenue per test at $20 give market size of $200m. Janison believe they can capture 25% of the market giving target market od $50m. 

From the attachment below, the dark green shading shows proportion of Janison's revenues to the target. They have made headway in the schools market reaching 25%. However, they are yet to make headway in Language through acquisition from LTC and higher education. 

Janison has also provided more inforgraphics and in particular market size in global test market. What struck me is that China & India accounted for 70% of global test takers in schools and higher education. Globally there are 517m school students and 87m higher education students take test annually. Janison has mentioned that entering those markets is a potential catalyst and was not accounted in the market size assumption.  

 

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#Business Model
Last edited 5 days ago

From the previous straw, it is apparent that the business model for Assessments is integral for their strategy. 

Digital Assessments business model 

  • When acquiring a new customer, the customer pay an initial project service fee. The fee is 25% of the total estimated contract value paid in advance. Afterwards, the costs are SaaS nature with platform fee being the only variable. 

 

  • After acquiring LTC, Janison gets expsoure to the Exam Services revenue. This is revenues from companies like IDP Education and British Council for doing the logisitics for high pressure exams like IELTS. The revenues are service based and due to COVID-19 this portion of the business will take a hit in overall FY20 revenues.  

 

  • In the attached file, we see that project services fees are lump sum while Service and License fees are Annual recurring revenues.
    • In 2018, 54% of total revenues were lump sum and by 2019 it fell to 40%. During 2018-19, you see that project services revenue remained flat at $5.6M however recurring revenue grew from $4.5M to $5.8M. Meaning that customers that paid lump sum in 2018 are now paying recurring revenues and that in 2019, Janison acquired the same amount of new customers as they did in 2018. 

 

  • The drivers of the business model 
    • Customer requests multiple exams (not just one) -> Service & license fee grow

    • Increase cost per test -> License fee increases 

    • Increase number of schools/students taking tests -> License fee increases 

    • The drivers depend on usage of services & license fee recurring revenues.

Digital Learning business model 

  • The learning model is similiar to the assessments but there is an additional "content recurring revenue fee". The customer pays an annual content recurring fee on either content made by a 3rd party or their own proprietary content. 

 

 

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#Business Strategy
Last edited 5 days ago

Janison have a long history like 20 years worth. So instead of boring the details of everything that happened. I'll summarise what they do. Janison builds scalable online education solutions for schools, Tertiary institutions and workplace customers (Government + corporates). 

They have 2 businesses 

  1. Digital Assessments
    • Provide large-scale digital exams for Schools and Tertiary customers using Janison Insights platform product.
    • Looking at revenue growth it is the fastest growing division at 40% annual growth rate. However, it has low 20-25% Gross margins. 
    •  Strategy 
      • To expand the Janison Insights globally. Going through APAC and targeting countries that have poor internet connection. They created a next generation product called “Janison Replay” allowing exams to be conducted in remote locations (with poor internet connection). Janison Replay, will ensure students receive a consistent, uninterrupted test experience no matter the quality of their schools’ internet connectivity. This solves a critical challenge and pain point in high-stakes online testing scenarios for educators and students alike.  

      • Utilise channel partners to enter new countries. In 2019, they signed a 5 year agreement with OECD that would allow them to access 80 countries. Currently, 7 countries are using Janison for the PBTS test. The test targets 15 year olds and allow schools to fins out how they are positioned with other schools in the same country. It is an optional test so not every 15 year old in that country would be doing it.  

      • Long term strategy is to use data from the tests to evaluate education systems (in a school, in a country). Through feedback, they can build products for Janison Academy or maybe even add consultation revenue stream for government departments. That last part is speculation, but they want to improve content for the academy. End goal is to get schools and tertiary institutions to use learning products in Janison Academy.  

      • Strategic acquisitions like UNSW Global to expand geographical presence by digitising key exams like ICAS. Also, acquiring LTC to create an "exam like environment" by using online inviglators.      

  2. Digital Learning 

    • Currently, provide learning content modules for government and corporate customers using Janison Academy platform.  
    • Modules are either Risk or Performance based 
      • Risk involve regulatory compliance and operations training 
      • Performance invlove life-long learning (like soft and technical skills)
    • Looking at revenue growth, it is slower than Assessment at 15% annual growth rate. However it has high Gross Margins at 50-55%. The learning business % of total revenue have been decreasing from 46% to 38%. 
    • Strategy 
      • Build additional learning modules to nurture existing customers. Utilise the acquisition of Ascender to build a library of learning content relevant to future corporate customers. 

      • Target customer have (1000+ geographically diverse employees) 

      • Increase Average Revenue Per Customer (ARPC) on the current 60 customers in the Learning platform by creating new learning products.  

      • Take advantage of COVID-19 and expand offering to Education institutions. I.e. digitize paper-based courses.  

    • Notably 2 large existing customers stopped using the learning platform. The customers were Kinross and Rio. They switched in 1H FY19 to either a low-cost LMS provider or to using in-house content which better suited for the mining industry.  

Overall, the company is reinvesting heavily on the assessment side. Although, recently due to COVID-19 Janison have been getting in-bound enquiries by education institutions to digitize learning content.   

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#Management
Last edited 2 days ago

This makes or break for investors looking at this company. Currently, the company is controlled by insders. The insiders own 50% of the company with the majority stake coming Wayne Houlden (founder) who owns 40% through (Diptoe Pty Ltd and Tentickles Pty Ltd). Also former CEO Tom Richardson's trust own 7% through Lenroc Investments Pty Limited (Richardson Family A/C).

Hence, with high inside ownership, the stock trades are very illiquid and does not bounce during a market rebound. Also, the actions by insiders dictate the direction the company. They have the power to change course without scruitinty from outside shareholders. This can be both an advantage or hinderance as shareholders are dictated by insiders. Thus, investing in this company require high conviction that management executes on their vision. It is structured like a family-own business and shareholders are reliant on management.     

When assessing management, Janison has experienced directors leading the company. Looking at the executive leadership team, nearly all of them have more than 10 years of experience. Most of them gained that experience in the education sector. From a board level, you double the experience, Tom Richardson the former CEO is the youngest with 19 years of experience. Did not know that Mike Hill (Chairman of Janison) was also the founder of Bomborra. One of the best investment managers in Australia. They invest in tech startups, grow them and exit through IPO. Those guys did 40% net of fees last year.    

When you buy Jannison, you are relying on Wayne Houlden to execute on international deals. As of 2nd July, he was promoted to Vice-chair and is now gonna play a strategic role in the company. The current CEO David Caspari will rely on Wayne for M&A counsel. The company is like a family and depending on the quality, management could out/under perform. I think they can outperform.            

 

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#Broker/Analyst Views
Added a month ago

21-May-2020:  CCZ Equities Research:  Janison Education (JAN):  Bargain acquisition unlocks another opportunity  

CCZ's call on JAN is still "Buy" but their TP has now dropped to 39 cents.  JAN closed at 30.5 cents on Friday (22-May-2020).

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#Broker/Analyst Views
Last edited 4 months ago

CCZ Equities Research have released two updates during February concerning JAN:

04-Feb-2020:  CCZ: Janison Education (JAN): PBTS Gaining Traction

13-Feb-2020:  CCZ: Janison Education (JAN): 1H20 Result: A+ for ARR Growth

CCZ's TP for JAN is 51cps and their Recommendation is "BUY".  JAN closed at 36.5c ($0.365) yesterday (06-Mar-20).

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