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#Bear Case
Added a month ago

I like some of the commentary around this company. The thesis is that universities will pay for quality candidates. But over 10% of the company is shorted, and government policy is restricting visa issuance, which creates uncertainty. It may be that the thesis plays out and revenue and profits continue to grow as expected, but in the meantime I think Mr Market is not prepared to pay as high a multiple, and it will trend downwards for a bit.

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#Analyst Consensus
Last edited 3 days ago

Adding to the UBS share price target of $25.30 shared by @Jimmy today, I’ve included consensus views from 15 analysts supplied by Simply Wall Street. Share price targets have been tracked against the current share price for the last 2 years in the chart below.

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Source: Simply Wall Street

The first thing that strikes me about this chart is how the 12 month price target follows the share price down. It doesn’t give you a lot of confidence in the target if the share price tracks down even further.

The other concern is the low level of agreement amongst analysts on the 12 month share price target with a dispersion of 15%. The highest price target is $29.47 and the lowest is $17.00. The consensus share price target is $23.84.

If the most bearish of the 15 analysts turned out to be correct and we bought IDP Education shares today at 3 year lows of $17.18, we would be down 1% in 12 months time. If we included 40 cps in dividends (77% franked, 53 cps gross), we would be up 2% on our investment in 12 months time. That’s not a great outcome, but if that’s the down side I’d be happy to cop that.

If the upside is analyst consensus of $23.84 we could be up over 40% in 12 months time, including the dividends.

Of course all 15 analysts could turn out to be wrong, and the shorters might be correct. During the COVID 19 pandemic IDP Education fell to a low of $10.89, so it’s possible for the share price to fall even further.

However, all these opinions are based on a 12 month horizon, and I’m more interested in how IDP Education will be performing in 2 to 3 years from now.

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Source: Simply Wall Street

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Valuation of $23.97
Added 2 months ago

Considered 3 scenarios Bull Growth 23% to Bearish 10% Growth. Share Count increase to 298.9m over 5 year FY28. Net Margins 12%. Blend 3 outcomes come to valuation $23.97

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#Bull Case
Added 3 weeks ago

Change in substantial shareholding notice from Challenger. They are up to 26m shares, buying 3m at a time every month or two for the last few months.

the optimist in me suggests that Challenger think that the 2% dividend will increase over time with profits (as per analyst predictions) and they are unconcerned with the risk of visa issues curtailing profits.

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#Canada Caps Student Visas
Last edited 2 months ago

The Canadian government has introduced a temporary two year cap on International student visas. Here’s a quick summary below:(https://monitor.icef.com/2024/01/canada-announces-two-year-cap-on-new-study-permits/ , 22nd January 2024)

  • Canada will establish a cap on the number of new study permits issued to international students
  • The cap will be in effect for 2024 and 2025, and is described as a temporary measure
  • Canadian immigration officials anticipate that the cap will result in a 35% reduction in the number of new study permits issued in 2024, compared to 2023 levels
  • In addition to the cap, the government also announced today that as of 1 September 2024, students enrolled in programmes delivered via public-private partnerships will no longer be eligible for post-graduate work permits
  • The government will also move to limit open work permits available to spouses of international students
  • However, post-graduate work rights will be expanded for students completing graduate studies in Canada, with such students soon being able to apply for a three-year post-graduate work permit

My Take

To date I haven’t heard any comments from management at IDP Education (IDP) however it can’t be good news for IDP, particularly on top of the Immigration, Refugees and Citizenship Canada (IRCC) announcing the approval of several other English language tests (CAEL, PTE Academic, TOEFL iBT and CELPIP General) for the Student Direct Stream (SDS) visa program starting from 10 August 2023 (https://bellpotter.com.au/ideas/idp-education-iel-stiff-competition/)

Previously, only IELTS was accepted. SDS is an expedited study permit process for students applying to study in Canada from ~14 countries. In 2022 IRCC finalised ~739k study permit applications. Bell Potter estimates that ~45% of these are via the SDS and the test is taken ~1.7x on average equating to ~500-600k IELTS exams p.a.

Bell Potter has assumed IDP could lose approx. 30% of the SDS market in making adjustments to their forecasts (https://bellpotter.com.au/ideas/idp-education-iel-stiff-competition/).

Importance of the Canadian market to IDP?

IDP provided the following graph in their FY23 Financial Results Presentation (https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02700602-3A623946)

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During FY23 Canada made up 24% of the enrolments by destination.

If we assumed the Canadian market will be reduced by 35% due to the temporary cap (Canadian Immigration Officials estimate) , and IDP loses 30% of the reduced intake numbers (Bell Potter’s assumption), we could expect the Canadian market to decline by approx 45%. Using some rough assumptions and some even rougher maths, this could possibly result in a 10% hit to FY24 earnings. However, Canadas’s loss will most likely be another country’s gain, and the two year Canadian cap could end up having little impact at all on IDP’s earnings. We also need to take into account earnings growth in other markets which could offset any losses in the Canadian market. The other thing to consider is this is a two year temporary cap, and the total market could be back to normal two years time. I think this is just a hiccup for investors with a long term perspective.

Summary

It’s difficult to estimate what impacts recent changes to the Canadian market will have on IDP’s bottom line, but I think the worst scenario is a 10% impact to IDPs earnings. However, the rest of the world is still growing and I expect other education destinations will adsorb most of the Canadian visa cap losses. Half of these losses (visa caps) are temporary and the Canadian business could be back to normal in two years time. I expect double digit earnings growth to continue despite the Canadian set backs.

I think this is a unique opportunity to build a position in this wonderful business at under $20 per share. The price could fall further though as short selling is likely to continue following the Canadian visa cap announcement. With short positions now over 10%, IDP is currently the fifth most shorted stock on the ASX and it’s never an easy ride betting against the short sellers.

Held IRL (1.8%), SM (14%)

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Valuation of $25.15
Added a month ago

Update 14/02/2023

Updating based on 1H FY24 results.

  • Revenue up 15% on pcp to $579.1
  • NPAT up 19% on pcp to $97.4m

1H results usually are stronger seasonally compared to 2H. So assuming similar growth for 2H compared to pcp, NPAT for the full year would be around $175m.

Based on a fwd 40x PE, gives a valuation of $25.15.

Updated chart below:

e95af2bc6afae9aad3760082294479650b16b0.png

Have been accumulating shares around $20, so happy to see a pop up today.

Disc: Held IRL and on Strawman.

Update 02/03/2023

Personally I thought the IEL results for the 1H FY23 were pretty good.

  • Revenue up 26% to $501.8m
  • NPAT up 62% to 82.1

Just simply doubling these numbers for the full year would give EPS of around 59c.

Now perhaps you could argue that with interest rates rising, a PE of 60x was a bit excessive, however you could also argue that they have justified this with NPAT increase of more than 60x.

If I give them a more conservative 40x fwd PE based on the 1H results then it gives a valuation of $23.60.

Updated chart below:

7677bbb9b9a6329160ee49438a6b242e9cf4fb.png

Disc: Not held but if the price fell below around $25 I think I will take a small nibble.

Update 25/08/2022

Updating valuation based on their FY22 results.

IDP Education have (imo) knocked it out of the park in the 2H with total revenue of $793.3m and NPAT of $102.8m. Putting the growth trajectory on track after covid disruptions.

Below is the updated chart with the FY22 numbers imputed.

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Valuation is based on 60x their NPAT result of $102.8m.

Disc: Not Held

Original Valuation

Had a bit of a look at IDP Education over the weekend after they reported their 1H22 results:

  • Total Revenue = $396.8m
  • EBITDA = $96.6m
  • NPAT = $50.8m

I've graphed out what they've reported as results for the past 4 years below

d46eea7aa8c7009a5d44d12aa6e8ec5880b4ff.png

Revenues are now higher than 1H20 which was pre-covid and is a good sign of recovery however both EBIDTA and NPAT were lower than reported in 1H20 (apologies my graph is a bit small to compare).

Seasonally 2H seems to be less profitable than 1H so I'm gonna assume around $90m NPAT for FY22 which means at the current share price ($28.53) they are trading at around 88x fwd PE.

Back in 2019 their avg PE was around 60x. So my valuation is based on a fwd PE of 60x on an assumption of around $90m NPAT for FY22.

I had a read through their announcement and presentation and didn't see any guidance given. And I'll admit that with a reopening to international students there may be a big backlog in 2H22 which may push their revenues and profit higher than my assumptions.

At this stage I'm more of a wait and see in terms of their future results. I don't expect there to be many more disruptions in terms of covid lockdowns but I also don't expect their growth to be reset back to pre-covid levels.

Disc: Not held

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#1H24 result
Last edited a month ago

IDP Education (IEL) has just released a solid result for 1H24.

• Record revenue of $579 million, up 15 per cent on H1 FY23, driven by strong student placement revenue growth of 44 per cent.

• Adjusted earnings before interest and tax (EBIT)ii of $159 million, up 25 per cent and adjusted Net Profit After Tax (NPAT) of $107 million, up 23 per cent, demonstrating strong operating leverage in the business model.

• Record student placement volumes of 57,300, up 33 per cent.

• English language testing (IELTS) volumes of 902,000, down 12 per cent.

• English language teaching volumes of 51,600 courses, up 15 per cent.

At this stage IEL are tracking ahead of analyst expectations with NPAT of $97.4 million ($107 million adjusted) and consensus of $173 million for FY24. However I am expecting the changes in Canada to make the second half a little tougher.

Management said “ the decrease in IELTS volumes of 12 per cent was due entirely to lower volumes in India, partially offset by increased volumes in other high-growth markets. The decline in Indian volumes was due to weaker industry conditions, increased competition and lower repeat testing rates for Canada.

The weaker industry conditions reflect a period in which international student demand was impacted by a decline in sentiment towards Canada, rule changes for student and dependent visas in the UK and an increase in visa rejection rates for Australia.

“Outside of India, IDP recorded IELTS volume growth of 17 per cent. This performance reflects IDP’s diversified global testing network which spans 87 countries and includes key growth markets for English-language testing. Our focus for English Language Testing continues to be on strategic investment in network expansion, multi-modal delivery, and product innovation,” Ms O’Shannessy said.

Quote ends.

Hopefully the market will react positively today. I’ve been accumulating IEL in IRL and on SM. I accept that in the short term there are a few headwinds facing this business, but I think the headwinds are short term and I am very bullish for continued growth in the long term. Will continue to add IRL on weakness.

A quick overview for now ahead of the market opening, but I’m expecting the market will be reasonably happy with the result today.

Held IRL (4%), SM (15%)

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#1H FY24 Results
Added a month ago

Education services provider $IEL announced their 1H FY24 results today.

ASX Announcement

Overall a minor beat to consensus on revenue, EBIT and NPAT, however, from my perspective its a result that is strongly supportive of my investment thesis, which I'll discuss briefly below.

Their Highlights

  • Record revenue of $579 million, up 15 per cent on H1 FY23, driven by strong student placement revenue growth of 44 per cent.
  • Adjusted earnings before interest and tax (EBIT) of $159 million, up 25 per cent and adjusted Net Profit After Tax (NPAT) of $107 million, up 23 per cent, demonstrating strong operating leverage in the business model.
  • Record student placement volumes of 57,300, up 33 per cent.
  • English language testing (IELTS) volumes of 902,000, down 12 per cent.
  • English language teaching volumes of 51,600 courses, up 15 per cent. 


My Analysis

So first, the bad news, and there is some.

Testing took a hit due to a significant slowdown in India, particularly wth respect to the Canadian market. This reflects increased competition, economic and sentiment factors, and rules changes. Without India, IELTS volumes grew 17%, with $IEL noting that the testing network spans 87 countries. At it is, IELTS revenues fell 5%.

Good news - Student Placements. Placement revenues grew strongly up 44%, with volumes up 33% and with pricing increases on top. This is the thesis-supporting result. Student placement and the suite of services around it represent the core part of the $IEL offereing where it can differentiate itself. And in an environment where governments across the board are tightening up on student admissions and visa approvals, what is an industry headwind is perhaps allowing quality providers like $IEL to take market share. Given their low penetration of the markets in Australia, Canada, UK and USA, to achieve 44% revenue growth is encouraging. Of course, the environment has changed significant over the last year and indeed over recent months, so it will be interesting to see to what extent this kind of performance can continue through H2 FY24 and into FY25. But so far, so good. I call out some more detail on this below from the presentation.

The rest of the financials looks, at first glance, to be a good story of reasonable operating leverage. Total expenses have been reasonably well controlled at +13% below revenue growth.

Interest at $11.3m is up 70% reflecting higher rates and the higher debt being carried as a result of the acquisitions of Intake (in FY23) and the smaller acquisition of Ambassador in May 2023, which gives a small, unquantified boost to the Ohter Student Services.

On the cash flows, there were strong investing cash outflows for the acquired business deferred considerations ($22m) and opening of 11 international offices (PPE $8.5m) and investment in the technology platforms (intangibles of $19.3m).

Operating Cashflow was actually quite weak, almost flat on the prior period. There is nothing remarkable on receipts and payments (in line with the financials). The big difference is on cash taxes paid, which at $52m (up 67%), so this will be a timing issue and, as there has been nothing untoward on recent reports on taxes reported in the P&L, I'll just make a note to look at this at the FY.

On the balance sheet, while borrowing rose from $209m to $285m to fund acquisitions and expansions, net debt to EBITDA is modest at about 0.83 (144/173) by my estimate.

Student Placements - a deeper dive

I include 2 charts from the presentation on students placements. They speak for themselves.

In the context of low market penetration, in a more challenging environment, $IEL as a quality provider is well-positioned to take market share. This is a service where quality (incl. chances of success in getting a Visa approved) can be a very strong reputational driver.

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My Key Takeaways

Good results in line with my thesis. However, like most analysts I didn't quite foresee the strength of placements and the weakness of IELTS.

My previous valuation of $IEL is $24-25. Today's result probably lifts that slightly, although some caution is advisable given the industry headwinds. So, I'll probably sit with the valuation unchanged until the FY result is in.

I suspect we'll see a positive market reaction today to the result, so I will await the next price weakness opportunity, as I'd like to increase my holding.

Disc: Held in RL, not on SM

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#Shorters pounce on CFO gap?
Last edited 3 days ago

It seems shorters of IDP Education (IEL) are looking for any excuse to put further downward pressure on the share price.

Today, IEL announced the appointment of Kate Koch to replace Murray Walton who is stepping down at the end of this week (31st March, 2024).

Kate comes with excellent experience and credentials, previously holding CFO roles at SEEK, RMIT, Tesco and Peason (London). Kate seems like a perfect fit for the role with her experience in the education and technology sectors.

The only issue is there is a 6 month delay between Murray Walton finishing in the role and Kate commencing with IEL (by October 2024). In the interim period the CFO responsibilities will be shared by the Finance Leadership Team, other members of the Global Leadership team and the CEO.

I don’t see this as a problem, but the shorters are having a field day using it as an excuse to drive the share price down another 4% in this mornings trade.

Short positions are now the highest on record with 12.85% of the stock now shorted (Shortman.com.au, 15/03/24).

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For patient investors with a long time horizon (2 to 3 years), I think IEL is a tremendous buying opportunity at today’s prices. At least I am excited by the opportunity and have filled up my shopping trolley this morning. Now I just need to be patient for a few years!

Held IRL (7.9%), SM (13%)

Kate Koch to join IDP Education as Chief Financial Officer

Following an extensive global search, IDP Education Limited (ASX:IEL) is pleased to announce that Kate Koch has been appointed to the role of Chief Financial Officer.

Kate is an accomplished senior finance executive with broad international experience, including in the education and technology sectors. Kate will join IDP from SEEK Limited where she has held the role of CFO since June 2021.

Prior to SEEK, Kate was CFO at RMIT University and held senior finance leadership roles at Tesco Plc and Pearson Plc in London. Through these experiences, she developed a deep understanding of the needs of international students and educational institutions, as well as leading global teams, including large shared services functions. Kate’s extensive and well-rounded experience supports a successful transition to IDP.

Tennealle O’Shannessy said “The IDP Board is delighted to have Kate join the team. Her commitment to purpose driven organisations and her passion for developing people align fully with IDP’s values. We feel fortunate to have identified someone with Kate’s unique experience of our industry, outstanding financial and commercial skills, as well as her exposure to complex international operating environments. Her appetite for creating transformative experiences for customers using technology has shone through.”

Kate’s appointment follows Murray Walton’s decision to step down from the CFO role, effective 31 March 2024, as was previously announced in December 2023. Kate will join IDP’s Global Leadership Team and report to Tennealle O’Shannessy. Kate will commence with IDP by October 2024. In the interim period between 1 April 2024 and Kate commencing with IDP, the CFO responsibilities will be shared by the Finance Leadership Team, other members of the Global Leadership team and our CEO.

-ENDS-

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#Broker View
Added 3 days ago

News SummaryDJ IDP Keeps Bull Despite Regulatory Uncertainty -- Market TalkIEL$17.51-$0.59 (-3.3%)$19.26$15.76

26 Mar 2024 15:44:551 View0444 GMT - IDP Education keeps its bull at UBS despite regulatory uncertainty including in Canada and the U.K.

Analyst Tim Plumbe tells clients in a note that the initial disruption on the Australian student-placement provider from policy changes in Canada aren't fully reflected in analysts' FY 2025 forecasts.

In January, Canada announced a two-year cap on foreign students.

With the U.K. heading for a national election this year, any tightening of student work rights being mulled by the center-left opposition could also have an impact, Plumbe says.

Nonetheless, he remains positive on the long-term opportunity. UBS cuts its target price 9.6% to A$25.30 and keeps a buy rating on the stock, which is down 3.5% at A$17.46. (stuart.condie@wsj.com)

(END) Dow Jones Newswires

March 26, 2024 00:44 ET (04:44 GMT)

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#Broker View
Added a month ago

GS have a PT on $IEL at $27.60, not yet updated as the below is a "First Take" - broadly in line with my remarks, although they have also called out the pricing strength.

Here's there summary takeaway issued recently.

"GS Take: We expect investors to react positively to IEL’s 1H24 result. IEL’s strong performance in student placement, through a period where aggregate student visa volumes are already softening, should in our view begin to build the case for market share to drive continued SP growth despite regulatory tightening. IELTS was a touch softer and we remain of the view that the Canada visa cap is likely to have a greater impact on IELTS than SP. That said, IEL’s impressive price increases in both SP and IELTS are a handy offset, while costs may be managed relatively lower in the 2H in line with the revenue outlook - helping to support achievement of full-year consensus expectations, in our view. Buy."

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#Management Ownership
Added 2 months ago

Inside Ownership                   Ordinary Shares          Net Value at $21.00

Peter Polson 50,0000 $1,050,000

Ariane Barker 21,684 $455,364

Greg West 27,817 $584,157

Chris Leptos 28,684 $602,354

Professor Colin Stirling 2,517 $52,857

Tracey Horton 2,200 $46,200

Michelle Tredenick 5,500 $115,500

Andrew Barkla 75,000 $1,575,000

Total 213,402 $4,481,442

*Total Insider Ownership under 1% total shares issued 

Recent Management Buying

Buying 18 Dec 23 Michelle Tredenick            3000 Shares at $19.73 ($59,190)

Buying 28 Nov 23 Tracey Horton                    500 Shares at $21.63 ($10,815)

Buying 10 Nov 23 Tracey Horton                    500 Shares at $23.45 ($11,725.92)

Buying 28 Sep 23 Colin Stirling                       1850 Shares at $21.52 ($39,818.76)


Management Bios

Peter Polson - Non-Executive Director and Chairman

Peter was appointed Non-Executive Director and Chairman of IDP Education in March 2007 and became Chairman of IDP Education Limited when the company was listed on the Australian Stock Exchange in November 2015.Peter has broad experience in the financial services industry, first as Managing Director of the international funds management business with the Colonial Group, then as an executive with the Commonwealth Banking Group with responsibility for all investment and insurance services, including the group’s funds management, master funds, superannuation and insurance businesses and third-party support services for brokers, agents, and financial advisers. He is currently Chairman of Avant Group Insurance Limited and Very Special Kids. Until October 2022, Peter was Chairman of Challenger Limited (ASX: CGF, listed company director from November 2003 to October 2022) and Challenger Life Company Limited. Peter is also a Director of Avant Mutual Group Limited, Avant Group Holdings Limited and Copia Investment Partners.

Ariane Barker - Non-Executive Director

Ariane was appointed as a Non-Executive Director of IDP Education at the completion of its IPO in November 2015 and is Chair of the Audit and Risk Committee.Ariane is a Board Member of Commonwealth Superannuation Corporation (CSC) since September 2016, where she chairs the Governance Committee, is a member of the Remuneration and HR Committee and chairs ARIA Co Pty Ltd (a subsidiary of CSC). She is also a member of the Investment Committee at the Murdoch Children’s Research Institute since 2011; and a former Board Director of Atlas Arteria (ASX: ALX, listed company director from March 2021 to December 2022) and Emergency Services & State Superannuation (ESSSuper). She has extensive experience in international finance, risk management, debt and equity capital markets and venture capital, with over 20 years in senior executive roles at JBWere (part of National Australia Bank), Merrill Lynch, Goldman Sachs and HSBC in the United States, Europe, Japan, Hong Kong and Australia. She was previously the CEO of Scale Investors from 2017 to February 2021. Ariane is Fellow and graduate member of the Australian Institute of Company Directors (AICD).


Professor Colin Stirling Non-Executive Director

Colin was appointed as a Non-Executive Director of IDP Education in February 2018.He is the President and Vice-Chancellor of Flinders University and brings more than thirty years of experience in international education in Australia, the UK and the USA.Colin is a Director of Education Australia Limited and has held various other board positions across health, academic and community organisations.Educated at the University of Edinburgh and with a PhD from the University of Glasgow, Colin began his award-winning scientific career at the University of California, Berkeley.


Greg West Non-Executive Director

Greg was appointed as a Non-Executive Director of IDP Education in December 2006. Greg is on the Council of the University of Wollongong and a Director and Chair of the Audit Committee of UOWGE Limited, a business arm of the University of Wollongong with universities in Dubai, Hong Kong and Malaysia. Greg is also a Director and Chair of Education Australia Limited and Education Centre of Australia Limited and Director of St James Foundation Limited and Fertoz Limited (ASX: FTZ, listed company director since February 2022). Previously, Greg was Chief Executive Officer of a dual-listed ASX biotech company. He was also formerly a Director of Tiny beans (ASX: TNY, listed company director from March 2022 to October 2022). He has worked at Price Waterhouse and has held senior finance executive roles in investment banking with Bankers Trust, Deutsche Bank, NZI and other financial institutions. Greg is a Chartered Accountant with experience in the education sector, investment banking and financial services.


Chris Leptos AO Non-Executive Director

Chris was appointed as a Non-Executive Director of IDP Education at the completion of its IPO in November 2015. Chris is also the Chairman of Summer Foundation, Chairman of Summer Housing, and the Independent Reviewer of the Food and Grocery Code under the Competition and Consumer Act. He was previously a Senior Partner with KPMG and Managing Partner Government at Ernst & Young where he had national responsibility for leading the public sector and higher education practice. In 2000, he was designated a Member of the Order of Australia for services to business and the community, and in 2022, he was designated an Officer of the Order of Australia for services to the public sector and education. Chris is a Fellow of the Institute of Chartered Accountants and a Fellow of the AICD.


Tracey Horton, AO Non-Executive Director

Tracey was appointed as a Non-Executive Director of IDP Education in September 2022. Tracey is an experienced company director with extensive international experience in leadership and senior management in the education industry and management consulting.She is currently a Director and Chair of the Remuneration Committee of the GPT Group (ASX: GPT, listed company director since May 2019) and is on the board of IMDEX (ASX: IMD listed company director since November 2023). She is a Non-Executive Director of Campus Living Villages Pty Ltd and Acting President of the Australian Takeovers PanelTracey has previously served on the Boards of leading listed companies, including as Chair of Navitas and Non-Executive Director at Automotive Holdings Group, Skilled Group and Nearmap. She has held several leadership roles in the not-for-profit sector, including President of the Chamber of Commerce and Industry of WA and Deputy Chair of the Australian Institute of Company Directors.


Michelle Tredenick Non-Executive Director

Michelle was appointed as a Non-Executive Director of IDP Education in September 2022.Michelle is a company director with extensive experience in businesses operating in a broad range of industries, including banking, insurance, wealth management, education services, health insurance, superannuation, and technology. She also runs her own corporate advisory business advising boards and CEOs on strategy and technology. She currently serves on several listed and private company boards. She is on the board of Insurance Australia Limited (ASX: IAG, listed company director since March 2018), Urbis Pty Ltd, First Sentier Investors Holdings Pty Ltd, and Zafin Labs Americas Inc. Michelle served as a Non-Executive Director of the Bank of Queensland (ASX: BOQ, listed company director from February 2011 to September 2020), Cricket Australia from 2015-2022 and was also formerly a director of the Ethics Centre and a Senate Member of the University of Queensland.


Andrew Barkla - Non-Executive Director

Andrew was appointed as a Non-Executive Director of IDP Education on 12 September 2023. He has extensive experience in the technology, services, and software industry, with more than 20 years of senior management experience in roles across Australia, New Zealand, Asia and North America. Andrew was CEO and Managing Director of IDP Education from August 2015 until September 2022. Prior to joining IDP Education, Andrew worked for SAP as President of Australia and New Zealand. Before this, he held leadership roles at Unisys, including Vice President of Unisys’ Asia Pacific Japan operations covering 13 countries, Member of Unisys’ Global Executive Committee, and Chairman of Unisys West: a technology services joint venture between BankWest and Unisys. Earlier in his career, Andrew was Vice President and General Manager of PeopleSoft’s Asia Pacific region prior to the company’s acquisition by Oracle. Andrew is currently Chair of Capsifi and on an Advisory Board Member at Guroo Learning

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#Shorts push higher…what now?
Last edited 2 days ago

There’s always a time lag on Shortman.com.au, so the current chart does not show further capitulation on the CFO announcement (24/03/2024). My guess is that the short positions have moved even higher than the 3 year chart below, which shows 13.3% of the stock shorted on the 21/03/2024.

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IDP Education has moved to take 3rd position on the most shorted stocks on the ASX. It could get worse than this.

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The only reason these punters would be taking out short positions is to make a profit. They make a profit by buying back their short positions at a lower price. So the punters are thinking the share price will go lower still. Of course technical analysts are the shorters best friends. I don’t think you’d find a single chartist who would be calling IDP Education a buy at the moment. It would be a huge AVOID / SELL! Chartist say the market is driven by sentiment and charts, not fundamentals.

I think the chartists are absolutely right…short term! If you are short term investor you should heed what the shorters and the technical analysts are saying/doing, and head for the hills!

However, for a time horizon investor we are trying to look past the short term headwinds (one year is short term for me) and share price volatility, into the future of the business (2 years plus).

Benjamin Graham said “In the short run, the market is a voting machine but in the long run, it is a weighing machine.” For long horizon investors shorters are our “best friends”. When Polynovo was trading under $1.00, David Williams (the Chairman) said shorters are our “best friends”. I didn’t quite understand what he was saying at the time, but I get it now.

So if shorters are your “best friends”, chartists are your second best friends because they help to perpetuate the downward share price cycle and leading it to capitulation. It’s not great if you own it!

We shouldn’t ignore our “best friends” though. They influence the market by destroying sentiment and they appear to be “right” for a long time. It’s extremely risky betting against these guys with a short term horizon in mind. However, if you have a long term fundamental point of view (two years plus), shorters and chartists are indeed your “best friends”. Why? Because they convince the market to do irrational things and serve you up “once in a lifetime” bargains. Although, taking up these bargains is an extremely lonely place to be. No one else is doing it which is precisely why you are getting a bargain.

So don’t expect anyone to back your call. You’re all alone here! Of course your long term fundamental thesis needs to be right, or things will turn very sour, both in the short term and the long term.

So we must listen to what the our “best friends” are saying, watch the charts and try to pick an entry point that delivers the least amount of pain as possible. A point where the downside starts to appear limited. That’s easier said than done. It’s not a great feeling arriving too early only to see the stock go down another 20% to 30%.

Matt Joass has some really great thoughts about this in his article on The Hidden Power of Inflexion Points

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#Short Squeeze?
Added a month ago

IDP Education is the 5th most shorted stock on the ASX with short positions on 10% of its shares. Today, following a good 1H24 result, there might be some nervousness amongst the short sellers which is helping to fuel the higher share price (up 10% at time of writing). Sometimes higher prices lead to higher prices, and we could see a short squeeze on IEL shares. It will be interesting to see how this plays out.

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Source: Shortman.com.au https://www.shortman.com.au/stock?q=IEL

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#FY23 Results
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Added 7 months ago

$IEL announced their FY23 results today.

Their Highlights

  • Record revenue of $982 million, up 24 per cent vs FY22; driven by strong student placement revenue growth of 63 per cent vs FY22.
  • Adjusted EBIT* of $228 million, up 40 per cent vs FY22 and Adjusted NPAT* of $154 million, up 45 per cent vs FY22, demonstrating strong operating leverage in the business model.
  • Record student placement volumes of 84,600, up 53 per cent vs FY22, driven by the Australian market growing 77 per cent vs FY22, and other study destinations growing at 39 per cent.
  • Record IELTS volumes with 1.93 million tests administered by IDP during FY23.
  • English language teaching course enrolments of 94,300, up 35 per cent vs FY22.
  • Final dividend declared of 20 cents per share taking full-year declared dividends to 41 cents per share, which is an increase of 52 per cent vs FY22. 


My Analysis

A strong result but, with today's "trigger happy" market, this is a marginal miss, so who knows what's coming:

  • NPAT = $149.1m vs consensus $153m (-2.5%)
  • EBIT = $220.7m vs consensis $227m (-2.8%)
  • EBITDA = $271.2m vs consensus $274m (-1.1%)


"Consensus" depends on your dataset. Mine is marketscreener.com (n=9 to 13 depending on the metric)

Overall, it is a strong performance on volumes and pricing, with revnue up 23% y-o-y on a constant currency basis.

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Control of direct cost growth to 10% has helped gross profits grow 33% and lower tax growth and low net debt have enabled NPAT growth of 45% or 42% on constant currency.

Now, having recovered from the impacts of COVID on the sector, % gross margin and % operating margin are back on trend showing the operating leverage of the business.

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Overall, cash generation was strong with FCF over $100m (including payment of $80.9 for acquisition).

The Student Placements business is the core growth driver and, within this, you can see the importance of the Indian market, shown below, with China yet to return to pre-pandemic strength.

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My Key Takeaways

International education is back, and $IEL has performed well in FY23, with strong growth and margin expansion.

I had been watching this company for several years and couldn't justify the SP in the heady days of $28-$32/share. However, earlier this year, when the market had a little tantrum over opening of the Canadian market to competition in IELTS my patience was rewarded, and I took an initial 2.5% RL position.

My reading is that the result today is strong, and with the SP below my preliminary valuation of $24-$25 (likely to be increase with the FY result in the bank), I'll happily take another bite today if the market has another sad-on with this minor miss.

Disc: Held in RL (2.6%) but not on SM. (I consider $IEL a proven,profitable, quality company and I tend not to hold these on SM)

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Valuation of $24.50
Added a month ago
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#Management
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Added 2 years ago

CEO/MD Step Down

IDP Education announced after hours last night that CEO and MD Andrew Barkla will step down from his role in Sept 2022. He will be retained in an advisory role until Sept 2023 and transition into a Non-Executive Director should he be elected by shareholders.

Full Announcement here

Disc: Not held.

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#Acquisition History
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Added one year ago


·      September 2022 Intake Education ~A$83m - is a leading student placement agency that has operations across Nigeria, Ghana, Kenya, Philippines, Thailand, Taiwan, India and the UK. https://www.asx.com.au/asxpdf/20220920/pdf/45f8wf987wtljm.pdf

·      July 2021 Britsh Council’s Indian IELTS operations £130 million IDP and the British Council currently both administer IELTS tests in India operating parallel pan-Indian distribution networks. The Transaction will bring BC IELTS India operations under IDP ownership, establishing a single network that provides the foundation for IELTS to build on its leadership position in India. https://www.asx.com.au/asxpdf/20210701/pdf/44xxdgcsfbcf17.pdf

·      May 2017 HCP Limited (20% Holding) $6.4m - a Chinese company specialising in delivering English language test preparation materials via social media and its mobile app. https://www.asx.com.au/asxpdf/20170607/pdf/43jsyhjp2q548n.pdf

·      Jan 2017 Hotcourses £30.1m with an additional £4.9m representing net cash in the business upon completion - owns and operates a portfolio of education search websites that help future students make the right study choices and connect with universities and colleges around the world. The company provides students with unique online tools to search for appropriate courses and plan their studies. https://www.asx.com.au/asxpdf/20170116/pdf/43fbr2bwjkq1r7.pdf

Capital Raise

·      April 2020 Raised $254m, $225m Institutional, $29 Retail at $10.65 per new share

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Valuation of $21.00
stale
Added 5 years ago
Record full year revenue and earnings with growth in each of the company’s core product categories. Although trading on a high multiple this is a quality business with plenty of growth left to play out. The current pull-back in share price could be viewed as an opportunity or you may prefer for the trend to turn. Student Placement volumes increased by 25 per cent. Student Placement network expanded in Nepal, Pakistan, India and Canada. Twelve per cent increase in English Language Testing volumes. ROE >45% and 100% cash conversion. Indian student numbers >38% increase. M&A activities will be another positive catalyst. Significant growth in Student Placement and IELTS volumes in India contributed to overall record business performance.
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