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KME - Kip McGrath

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hueyt

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In keeping with the theme that Education will be one of the key industries of the future I came across a stock called KME and would like to get more opinions on this.

Background
- Started in Oz as a kindy to 16 tutoring business
- The business is a franchise model. I.e. the McDonalds of tutoring businesses
- Expanded to UK and now makes more $$in UK than it does here

Growth
It recently embarked on two new products. (1) English classes for non-english speakers (2) Pre-university courses. And is now expanding into the South East asia.

I quite like the story and have entered into a small position. The price has given away a little somewhat however.

Do you guys think this stock has the legs to run further?
 
I liked the story and got in recently too with a small holding. I hope you have hung on because IMO this stock is going to show good growth. Look at current depth - lots of buyers and not many sellers.

I have done a bit of research and like the forecast EPS. $26M cap and IMO this stock is undervalued, it had a few problems a while back when it started buying and running its own centres - management saw the error of their ways and sold them and back to what they do best. Big plans unfolding to expand into a lot of new markets. Stable and solid management and a great product.

-MD Presentation at AGM Oct 2006-
"We were very pleased that the company continued to increase its number of
franchises during the year from 584 to 648.
As our income is essentially an annuity income once a franchise is sold, the
more franchises we have the greater the company’s continuing income.

We have centres in 20 countries. Only Australia, New Zealand, Samoa and
Fiji are full or almost full. UK with 253 centres is half full.
In the USA we haven’t begun to fulfil the potential. In the countries where we
have a presence there is a market for 1000’s more centres. Then there are
another 100 countries where we could open centres.
This potential is the reason we spend a good part of our income in further
development of curriculum and expanding into these markets. Without this
expenditure to create growth for our future our profits could be much higher.
However, it is our belief that when the future has as much potential as our
future does, we should be investing to see it fulfilled."

Interested to hear what anyone else thinks.
 
KME

Does anyone have a view on KME, specially after its recent announcement regarding the purchase IOTA a higher education provider.
 
Been a holder for a while now, jumped up nicely on profit update. Its a growth sector and there are a couple of really good businesses in the space, KME just seemed the best value at the time.
 
A very positive AR released today, profit up 40% to $2m, mcap $28m. Gushing cash with over $5 million in the bank, trailing yield of 4.6%. The increase in profit with almost no growth in revenue is impressive! Almost no fixed assets or CapEx, very low debt, good cost control. A cash conversion machine! My range of IV is $1.20-$1.90.

Market liked the results too, pushing KME up nearly 9%.
 
Deja vu for 2019, one of my higher conviction positions.

Screen Shot 2019-08-28 at 1.02.40 pm.png
 
KME up nearly 20% in 2 days of trading this week! No news. Very little supply, yesterday there were no sellers at any price. Someone wants in and happy to pay up! Thankful I topped up my holding in the high 90c range.
 
Thanks Trav. I started buying in 2017 at 39c, my average is 65c. Makes up for a few of the ones I got wrong!

I was talking to a mate yesterday and he has a client who bought a significant parcel when they were 4c and has never sold!
 
galumay said:
Thanks Trav. I started buying in 2017 at 39c, my average is 65c. Makes up for a few of the ones I got wrong!

I was talking to a mate yesterday and he has a client who bought a significant parcel when they were 4c and has never sold!
Click to expand...
That is a bit of an under the radar pick gulumay, but with the appalling state of our education system, a very clever pick. IMO well done mate.
 
galumay said:
Thanks mate, i do tend to look under the rocks where no one much else hangs around!
Click to expand...
I've put them on my watchlist and will be picking some up if opportunity presents. I've seen how bad the education system is first hand, teaching my 9 year old grandson how to add up and subtract, before he goes into grade 4 in Feb. :mad:
 
Hopefully you get an opportunity, I think the election result was a strong positive for KME given its growing presence in the UK, I assume thats got a fair bit to do with the recent run up. Also talk of merger or takeover has been in the market.

The next opportunity will possibly be after the ½ yearly, given how strongly its run up, anything other than spectacular results will probably be punished fairly hard.
 
galumay said:
Hopefully you get an opportunity, I think the election result was a strong positive for KME given its growing presence in the UK, I assume thats got a fair bit to do with the recent run up. Also talk of merger or takeover has been in the market.

The next opportunity will possibly be after the ½ yearly, given how strongly its run up, anything other than spectacular results will probably be punished fairly hard.
Click to expand...
You were spot on galumay, they were spanked, down 30%.
Revenue up 22%, earnings up 12%, profit down 8%.
 
CV19 turns out to have accelerated the evolution of KME to cloud based online lessons. Most face to face students who resorted to online in the lockdown preferred the online version. Online is higher margin for Kip. Large market opening up from the majority of potential student clients who are too remote from a Kip tutor. $5.9m to be raised @ 90cps to accelerate growth in online business, most to be used for marketing and personnel hire.
Held

Screenshot_20200609-123716_Drive.jpg Screenshot_20200609-123739_Drive.jpg Screenshot_20200609-123754_Drive.jpg Screenshot_20200609-123811_Drive.jpg
 
I was a bit annoyed to find retail SH's were excluded from the CR, but I guess with such a small raising they saw no need.
 
It's only a small amount. Sounds like they're in a rush and have lots of work on their plate. A shareholder entitlement of SPP is more expensive and time consuming. Normally I'd feel likewise.
 
KME @ 0.91 Monday close

Kip McGrath would be one that I think I'd be accumulating if it were not for the fear of the general bust ahead.

Two directors were buying on market very recently at almost 99c per share with the price closing at just 91c on Monday. The directors spent about $50k and $100k.

The price has been almost at the 90c placement price that raised $5.9m, announced June 6. Price back up so far today on neglible volume.

If you take the presentation that accompanied the cap raise as read, the new equity is to constructively fund extra staff and a marketing campaign for the cloud based Kip Onlne remote learning service. It's like the Kung Flu interruption has been a springboard for the online version of Kip lessons because it forced students to try it instead of face to face lessons and most of them liked it. Online lessons went from 10,000 over 5 years, as the platform was developed, to 20,000 in a single week during the advent of Covid-19.

The 'addressable' student market using Kip Online in U.K, N.Z, S.A and AUS is much much larger than face to face as 60% of students are remote from a K.M learning centre.

In the short term Kip won't shine because, while FY20 revenue is expected to be up on FY19, EBITDA was slightly lower at 30 April vs same period last year. But Kip's EPS and ROE have consecutively grown for the last 7 years and book value has been inching ahead too. ROE was 22.5% in FY19. Company has no long term debt.

Kip Mcgrath has engaged only 1% of the potentially enrollable students in AUS alone and across the four countries it is so far positioned in there are estimated to be 20 million reachable students.

Held

Weekly chart does look a bit dodgy imo
big (67).gif
 
Its definitely a good business, @finicky - I also held off accumulating more under $1 as its already one of my biggest positions. Will probably regret it going forward as I suspect it will do very well.
 
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