NVT - Navitas Limited

[craft]

Re: NVT - Navitas

you now got to discount for this probability that more universities will want to go down this path and more hit to earning and impairment.

it may not happen and I don't think many would (due to its network of agents and contacts to bring in students for the uni) but this stock can no longer command the same premium it once has.

I sold out with the price run up before the result and now watch with interest and not cheap enough for me
because now I give it 50% chance that more impairment may happen to be on the safe side

have taken this impairment into my discount model and price has to be under $4 for me to get interested.

Now ROE I'm going to start thinking your related to RM if your keep making these belated disclosures.


Contract renewal risk is not new for NVT - crikey, they were warning about it in the IBT prospectus. Nothing for me in the half yearly regarding Macquarie contract that wasn't already known and fully expected.


Disclosure, I wasn't clever enough to sell before the drop - but then I'm still more than happy to be exposed to the business and hope to be so for a lot longer.

 

[craft]

Re: NVT - Navitas

Thanks skc, so how should I interpret the results, it seems to me the impairment is real, and has a real impact on NPAT and therefore EPS, should I largely ignore the impact because it is expected to be a one off? That seems to lead down a dangerous path to me! Would be grateful to hear your thoughts.

I know you didn't ask my thoughts but its an interesting question so I hope you don't min if I give you my perspective.

SAE had a 2.7 Million restructuring cost and a 1.2 million acquisition cost which are both tagged as non-recurring expenses. They however didn’t adjust underlying earnings by theses amounts – many company’s do – so NVT is conservative on this front.

As far as I understand the SIBT goodwill is on the books because of the company consolidation in preparation for listing (when it was IBT). It was effectively created by the stroke of an accountants pen as the consolidation triggered business acquisition accounting requirements. Similar assets built since listing do not show any good will in the books, and hence would not show any impairment if earnings relating to them decreased.

The earnings impact is important – but the impairment charge is just ink on paper, reversing the previous recognition through the consolidation process. If SIBT subsequently gets a standalone campus or new partner up and running the goodwill that creates will not be shown in the books but will exist in an economic sense.

Based on the above – I think the impairment should be excluded when looking at the economic reality of the business – and the other 3.9million of non-recurring for SAE should be duly noted but not excluded. This is exactly what NVT did in their presentation.

 

[galumay]

Re: NVT - Navitas

I know you didn't ask my thoughts but its an interesting question so I hope you don't min if I give you my perspective.

Craft, you are one of the members here that I am most grateful to hear input to any discussion from. You always post with thoughtful and carefully considered ideas, clearly and well expressed.

...Based on the above – I think the impairment should be excluded when looking at the economic reality of the business – and the other 3.9million of non-recurring for SAE should be duly noted but not excluded. This is exactly what NVT did in their presentation.

Thanks, so on that basis, the business should not suffer much negative impact in the longer term and the market has probably over reacted. (surprise, surprise!)

 

[peter2]

Re: NVT - Navitas

Thanks Valuesnatcher NVT is an interesting chart that recently popped up in one of my daily scans (those blue bars).

I like the higher lows with the rising OBV, TMF. IMO this indicates accumulation after the latest price shock.

As the weekly/daily trends are down I would treat this as a reversal setup, but it's not for me as price is still below a lot of price action (July14 - Jan15). There will be a lot of unhappy holders that would love the chance to sell near break-even if price moves higher.

A clean break and close above 5.50 would be the first level I'd look for a low risk buy signal as the first target would be the gap fill to 7.00.

 

[galumay]

Re: NVT - Navitas

There will be a lot of unhappy holders that would love the chance to sell near break-even if price moves higher.

I am not sure about that assumption, NVT is very popular with long term value investors because of the business model and the fundamentals, most of them would believe its well under valued at current prices and I doubt many would sell just because the price moves higher again.

There might be some traders that got caught when it dropped due to some short term, less than ideal news, and they might well want out if it goes back up, but on the other hand wouldnt you expect traders to get stopped out when it fell?

 

[Muschu]

Re: NVT - Navitas

I held NVT for many years from the float and then, off and on, until some months ago.

I now consider the risks, particularly competition and contract renewals, too high.

NVT may well go up but I see no reason to expect any major growth. For myself I decided to look for growth and potential elsewhere.

Just my thoughts.

 

[notting]

Re: NVT - Navitas

Well it stabilized for the last few weeks then updated the market and fell 4.29% today.
Guess that's a confirming vote down after a little think.

 

[galumay]

Re: NVT - Navitas

Well it stabilized for the last few weeks then updated the market and fell 4.29% today.
Guess that's a confirming vote down after a little think.

I thought it looked a bit oversold, the news was hardly unexpected nor particularly bad. Wont be surprised to see it retrace fairly quickly.

 

[So_Cynical]

Re: NVT - Navitas

Added NVT to my superfund today, im limited to the ASX300 so a certain level of underperformance is locked in, NVT is the only Education stock i hold and i do like the currency mix and current price.

 

[notting]

Re: NVT - Navitas

On a positive start to a new week NVT continued to fall after a fairly strong down turn last week.
Not a good sign.

 

[VSntchr]

Re: NVT - Navitas

An interesting update from Navitas yesterday.

Entering an agreement with the Uni of Western Sydney. This should assist in filling the hole left by the loss of the SIBT contract.
What interests me is the the fact that, for the first time, they have actually gone 50:50 in the establishment of the college. Previously, they lease premises from third parties or have premises provided by institutions under various partnership agreements.

So the question I am trying to answer is: why?
Do they think that this capital investment will produce superior returns to the previous model? Will the seats on the board give them better control and allow them to refine the operations to skew profitability further in their favour?
-or-
Does this show a loss of negotiation power? Would UWS only sign based on the agreed terms?

Or perhaps the answer lies somewhere in the middle, i.e. Navitas is happy to proceed in this fashion but is somewhat forced to because UWS does not have sufficient budget to complete on their own.

 

[galumay]

Re: NVT - Navitas

An interesting update from Navitas yesterday.

I had a similar line of thought, the market certainly seems to have its doubts!

 

[Klogg]

Re: NVT - Navitas

So the question I am trying to answer is: why?
Do they think that this capital investment will produce superior returns to the previous model? Will the seats on the board give them better control and allow them to refine the operations to skew profitability further in their favour?
-or-
Does this show a loss of negotiation power? Would UWS only sign based on the agreed terms?

Or perhaps the answer lies somewhere in the middle, i.e. Navitas is happy to proceed in this fashion but is somewhat forced to because UWS does not have sufficient budget to complete on their own.

The way I see it, incentives are now completely aligned. There's absolutely no reason for UWS to pull-out from a Navitas agreement, given they have a 50% share of it already.
If UWS were about to walk-away from the previous agreement, this should lock them in. (I'm assuming they were previously a client)

Does this set a precedent for future clients that may not renew such contracts?

 

[ROE]

Re: NVT - Navitas

I had a similar line of thought, the market certainly seems to have its doubts!

I think the risk becomes a little clearer
NVT I think now realise there are risk to renewal of their contracts so they move to mitigate the risk

 

[So_Cynical]

Re: NVT - Navitas

Contracts come and go and come again, that's the business of contracts, the day after a business signs a supply contract is the day that they are 1 day closer to losing the contract...nothing lasts forever.

 

[Ves]

Re: NVT - Navitas

I think these are JV agreements are both with universities that they haven't partnered with before.

It's entirely possible that they are signing with universities using JV agreements to mitigate contract risk.

However it is also entirely possible that they are (also) using them to access partnerships with universities that would not partner with them using a completely Navitas controlled operation. If that's the case they it probably opens up a raft of new domestic opportunities.

 

[robusta]

Re: NVT - Navitas

Northern hemisphere up 6% despite UK being down 13%

http://www.asx.com.au/asxpdf/20150630/pdf/42zhtpdcyn3fz9.pdf

Later this month we will find out how the south is performing then it should be a short wait to see if SAE is improving.

 

[robusta]

Re: NVT - Navitas

Results out today, the numbers look good to me. Macquarie situation will mean the growth will however be flat in F/Y 16

I just listened to the podcast. My main points of interest are;

The J/V model seems to be the strategy from Navitas to stop universities leaving in the future. There is a lot of interest from current universities to move over to the joint venture model. This will impact the value NVT gets out of future agreements. It should be many years before this becomes material. They are looking at 1 or 2 a year. From the point of view of start up they are sharing the costs. The other advantage of the J/V is if a Uni wants to leave they will have to buy Navitas out for a full and fair value.

UK regulations seem to be impacting enrolments significantly. Australian regulations should have a positive impact in F/Y 17

UP may be down F/Y 16 and F/Y 17 due to the calendar year impact of Macquarie.

US growth is looking good with a number of new initiatives on the horizon.

 

[Faramir]

Re: NVT - Navitas

Can anyone comment on this latest news release?

Navitas and Curtin University to refocus partnership on WA and Singapore colleges - Curton University Sydney campus to close
http://www.asx.com.au/asx/statistics/displayAnnouncement.do?display=pdf&idsId=01662464

Curtin University Sydney (CUS) is closing in February 2017. This is a cost saving measure.

Combining La Trobe and Curtin smaller campus into one larger campus should consolidate expenses.

The news release states:

Given the alignment of operations in Sydney it is not anticipated that the gradual closure of CUS will have a material earnings impact.

Any comments?

 

[Klogg]

Re: NVT - Navitas

Northern hemisphere up 6% despite UK being down 13%

Yesterday's investor day presentation suggested that the rate at which education providers reject visa applicants will change from 10% to 5%... If numbers have to be that tightly managed, I can see some providers being unable to meet that requirement, making student numbers drop further.

Surely this runs counter to the intention of introducing these regulations. I can understand the government wanting to accept as many students as possible, but if the provider can't manage the workload, they're just going to play it safe and aim to reduce advertising/applications. It seems that after a few providers either exit or start shrinking, the government will change their approach and those that are ready will be able to accept larger numbers of students.

The other approach is that providers, wanting to reduce demand, simply elevate their prices to find the level of supply/demand required...


Just thinking out loud.