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KME - Kip McGrath

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I'm pretty convinced there'll be an opportunity to buy any stock a lot cheaper in the 12 months ahead @galumay. I rely on @DaveHcontrarian on twitter for conviction about that. Kip will be on my list to accumulate but cashing up is my objective over the next month or two now eofy has passed. Won't be selling any Kip though, only hold 10,000 shares. I get the impression from others that the franchising system is working for KME too - as well as the online tutoring
 
KME reported on their AGM today, no real news, no profit guidance due to covid, but Mr Market was in a cheerful mood anyway and pushed it up strongly, +7.4% to $1.45 to reclaim most of what it lost from March. Back to being one of my largest positions. My comments about failing to accumulate more have come home to roost!
 

Kip McGrath Education Centres Limited's (ASX:KME) Has Been On A Rise But Financial Prospects Look Weak: Is The Stock Overpriced?​


simplywall.st

Kip McGrath Education Centres Limited's (ASX:KME) Has Been On A Rise But Financial Prospects Look Weak: Is The Stock Overpriced?

Kip McGrath Education Centres (ASX:KME) has had a great run on the share market with its stock up by a significant 10...
simplywall.st simplywall.st

DYOR

i do NOT hold this share ( but have worked as a sub-contractor for them about 20 years back )

will probably spend some of the long weekend deciding if to put this on my watch-list ( and calculate a buy price )

have the last two years created an opportunity for this business ( many school students have had their education badly disrupted ) ??
 
@divs4ever I have held for a while, I was talking about it to a friend on twitter who was topping up last week when it dropped below $1, i think its pretty good buying at that level. My range of IV is around $1.50. Most of the other metrics I look at are supportive of that view. Probably the weakest is ROIIC, its a bit below my normal hurdle.

I thought the Simply Wall street was typical of the sort of nonsense these mobs produce. Quite a few of their calculations were simplistic and varied from how I would assess them.

Like a lot of your positions I have held them for long enough that my potential capital gains are enough to give me a significant cushion even if they dont execute as well as I expect. Meanwhile the divvies keep rolling in.

I hold a fairly substantial position, but would probably consider adding at below $1 when I have capital to deploy, at that price its probably one of my higher conviction holdings.

If you do a deeper dive I will be interested to hear your thoughts on the business.
 
it was quite a few years back and don't know if management has changed much , but they were a fair and reasonable business to deal with ,

if they had kept those ethics ( they had back then ) , but mind you back then they were a face-to-face educator ( and franchise system ) that tech stuff can work both ways

the long term risk is a shrinking aging population , but possible short-term tail-wind are school-children needing remedial teaching AND displaced workers needing to up-skill

Kip McGrath to Acquire Majority Stake in Tutorfly Kip

McGrath Education Centres Ltd (ASX: KME) (Kip McGrath) is pleased to announce it has agreed to purchase a 70% stake in the US based business Tutorfly.com. (‘Tutorfly’). Tutorfly is an incubator tutoring business concentrating on the peer-to-peer section of the market, which achieved rapid growth during its initial start-up phase.
The business has developed a scalable technology stack which demonstrated rapid growth in the 2020/21 US school year, increasing quickly from 1,300 to 5,500 active students, peaking at 3,200 hours of tutoring per month. Entering the US summer break the business was still delivering around 900 hours of tutoring per month. Kip McGrath will take a 70% stake in the business for an initial payment of USD 500,000 via its newly incorporated subsidiary, Tutorfly Holdings Inc. The remaining 30% will be held by the founders through their existing company, Tutorfly Inc. Kip McGrath will make a further payment of USD 500,000 to Tutorfly Inc. when Tutorfly achieves USD20,000 per month net revenue targets (calculated as revenue less tutor fees). Under the Agreement Kip McGrath grants an option for Tutorfly Inc. to sell its remaining 30% stake to Kip McGrath for USD 2,000,000 in cash, an equivalent number of Kip McGrath shares or a mixture of cash and shares. This option may be exercised once the business achieves USD 50,000 per month net revenue targets. The option will allow Tutorfly Inc. to subscribe for and be issued USD 2,000,000 in Kip McGrath shares up to a maximum of 2,000,000 shares. If the USD equivalent price of Kip McGrath shares that may be issued under the option at the time of exercise is less than USD2,000,000, then Kip McGrath will pay Tutorfly Inc. the shortfall amount in cash. The option is issued within Kip McGrath’s 15% placement capacity under ASX Listing Rule 7.1. Alternatively, Tutorfly Inc. may elect to receive cash instead of Kip McGrath shares at the time of exercise. Completion of the acquisition is expected to occur in September 2021 and is conditional on a number of standard corporate conditions precedent being satisfied or waived, including:
• Systems: All relevant IT and telecommunications systems being in place for Tutorfly Holdings Inc. to operate the business.
• Support Agreement: Tutorfly Inc. entering into an agreement to provide software and business advisory support to Tutorfly Holdings Inc. on terms satisfactory to it.
• Third party consents: Tutorfly Holdings Inc. receiving duly executed copies of all required third-party consents, approvals and assignments (including any assignments of software licenses) required to effect the sale. 2 Management Commentary The Kip McGrath CEO and Managing Director, Storm McGrath advises Tutorfly is a strategic move for the company. “We are looking to expand our business into other areas of the tutoring and supplementary education market and in particular the USA, which is the largest tutoring market in the world.
Tutorfly is a marketplace business where tutors and students are matched through a pairing algorithm with software which is globally scalable.
The rapid growth of the business during the difficult 2020/21 US school year was very exciting.
Through the injection of additional funding, it is expected these numbers will grow quickly again for the new 2021/22 school year. In addition, there are other synergies between the businesses.
Being able to share the technology of a fast and nimble online only business with the experience and knowhow of Kip McGrath, opportunities will be realised almost immediately. The Texas-based Tutorfly Head Office will also provide Kip McGrath with a launch pad for centres into the USA market.” The co-founder and CEO of Tutorfly Inc., Parsa Rezvani said “The combination of an established bricks and mortar tutoring centre brand and the know-how within the tutoring space of Kip McGrath, along with the robust technology stack, with differentiated and effective peer tutors in Tutorfly, will be a significant force. The Tutorfly brand is already well established in tutoring marketplaces across the USA and allows parents to browse, contact, and hold virtual tutoring sessions with tutors of their choosing, without needing to go through a Tutorfly employee. The Tutorfly Team is especially excited to team up with Kip McGrath to further equip Tutorfly Tutors and students with proprietary Kip McGrath content, curriculum, and training materials.
We also see other synergies between the two groups down the line, especially as Kip McGrath looks to provide more flexible tutoring options to its tutoring centres globally. My co-founder, Alejandro Mendoza and I will be pleased to serve on the Board of Tutorfly Holdings Inc. from completion and commit to being great partners to Tutorfly’s new management team.
In fact, we intend to sign a Service Level Agreement (SLA) that has our new company, GoSchoolBox.com, maintaining the technology stack of Tutorfly for at least 12 months, to enable the management team to focus on scaling the business operations of the company. On a more personal note, my parents immigrated from Iran as teenagers during the revolution of 1979 in search of educational and work opportunities. Education propelled them from their status as poor immigrants to becoming successful in their respective careers in education and engineering.
Amidst an ever-changing world, we remember that education is the one true equalizer in our world. It’s humbling to become a part of an organization started by the McGrath family that shares our Rezvani family’s values”. Storm McGrath added: “The global tutoring market is changing rapidly. Parents and governments are looking at ways to rectify the learning gap created by COVID-19 and to ensure children have the best opportunity possible to reach their highest potential.
Being able to offer two brands working together in different segments of the market, demonstrates Kip McGrath is focused on additional ways to grow the business faster. With Tutorfly a standalone business it will allow us to continue to focus on growing the core Kip McGrath Business at the same time. We look forward to working with Parsa and the Tutorfly Team to grow the Tutorfly business.” The Board has approved this announcement.

DYOR

this ann . is a little old , but leaves one to wonder their definition of 'stand-alone ' is the new business 'an empire unto itself ' or will there be intelligent cross-pollination of ideas , where suitable

now i am always cautious over international expansion plans as it increases regulatory risk

i NORMALLY look at KME and wonder if the education regulators will throw a box of wrenches at this sector to protect the image of the public and private school system ( including the 'universities ' )
 
Very good H1 2022 results for KME out today, given the headwinds they have faced in recent times they have done very well.
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FY 2022, a bit softer in the 2nd half, still reasonable result. no real surprises, I think they have done ok considering the potential of the impacts over the last couple of years. One thing I couldn't work out was the drop in NTA.

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galumay said:
FY 2022, a bit softer in the 2nd half, still reasonable result. no real surprises, I think they have done ok considering the potential of the impacts over the last couple of years. One thing I couldn't work out was the drop in NTA.

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might have shifted from owned hardware/software to cloud-based .. just guessing

and in a post covid era they may also have divested property assets ( leaving only leased/rented buildings )
 
from memory they were expanding internationally as well so it MIGHT be changes in accounting standards to accommodate operating in new jurisdictions

but yes the drop in NTA is an eye-brow raiser

also see the Tutor-Fly deal ( December 2021 ) that included shares in the transaction so part of it might be share-holder dilution
 
I thought of the dilution, but thats not going to get you from 4.5c to -0.66!

Could be changes in accounting standards, but I would expect to see that in the balance sheet and notes?
 
since you are shareholder ( unlike me ) perhaps you should ask them directly .

as i have said earlier ( when i sub-contracted for them ) they were reasonable to deal with ( 20 years back )

the drop in NTA should be ( mostly ) explainable

MAYBE there is cash held in trust in case the Tutor-Fly (original ) owners choose cash instead of KME shares when to options expire

but that still shouldn't leave the NTA negative

depending on your information sources the US is heading into boom ( or dark ) times

will there be an increased trend into home-schooling ??? ( which would be a nice trend for KME especially with the increased acceptance of lessons via Zoom )
 
Oh I have already emailed them asking about it, I just mentioned it here because there are many investors much smarter than I, and it might have been something obvious I was missing that you or someone else saw straight away!
 
KME up another 10% today.
Hadn't noticed the lively investigative discussion here on it.
I haven't bothered to look beyond the chart. Kip are always playing for tiddlywinks when it comes to tangible dollar results so my interest has waned for it as an investment.
The monthly chart remains well within a two and quarter years downtrend channel (roughly speaking) but the weekly chart is a cause of interest. Firstly, and mainly, the high volume bar for the final week of June. Of course only high volume relatively - all volume for Kip is puny. Price has broken through local resistance at 50c and weekly momentum has diverged positively. There's a reasonable argument that it bottomed @ 40c but zooming out, it might just be a rally within the aforementioned downtrend 'channel'.

Held

WEEKLY 5 YEAR

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I wondered if KME was leaking a bit of news about H2 trends or trading update. Seemed an odd spike in price & volume. Probably nothing, just someone wanting a position and it's pretty illiquid at the best of times! Had a poor H1 and ended up paying divvies out of borrowings which I hate as its such poor capital allocation. I am holding with paper hands!
 
InsvestoBoy said:
Ever get to the bottom of this?
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Sort of, spoke to the CFO & he pointed out the previous FY was the outlier and 2022 was a return to mean that showed as negative NTA, I had sort of worked that out from working back thru the balance sheets. The loans to directors were a red flag for me too, but the CFO claimed the rate was market rate at the time, should have asked why they used fixed instead of variable, but overall the call didn't inspire much confidence in their capital allocation/management.
 
galumay said:
Sort of, spoke to the CFO & he pointed out the previous FY was the outlier and 2022 was a return to mean that showed as negative NTA, I had sort of worked that out from working back thru the balance sheets. The loans to directors were a red flag for me too, but the CFO claimed the rate was market rate at the time, should have asked why they used fixed instead of variable, but overall the call didn't inspire much confidence in their capital allocation/management.
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I assume your IV is no longer ~$1.5? Though I can see on CommSec that Morningstar Quantitative has it for $1.25
 
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