NVT - Navitas Limited

[Klogg]

Re: NVT - Navitas

Surely this runs counter to the intention of introducing these regulations. I can understand the government wanting to accept as many students as possible

Sorry, no it doesn't. Clearly misunderstood the intention of the regulation. Ignore my the crap I wrote...

Nevertheless, the outcome of more efficient providers surviving remains in place.


Just finished listening to the Investor Day presentation. The SAE CEO raised an interesting point of focusing on ROCE and EPS, rather than growth for the sake of growth (suggesting that less schools may lead to better financial outcomes) - Like.

 

[craft]

Re: NVT - Navitas

NVT is on the periphery of Vocational education - just cooling their heels.

If you go to about the 3 Hour 5 Minute mark there is a interesting answer to a question regarding the VET sector. If you want to know what quality and ethics in education and looks like and you have three hours to spare you could watch from the start.

http://edge.media-server.com/m/p/2nj6h35o

ps

Buying quality is boring compared to the swings in this sector lately but if you are looking for a passive long term investment there is no substitution for quality.

For mine (a very long term view) - Association with VET sector, Macquairie contract loss and Various governments around the world playing around with visa entry requirements has produced a good environment for accumulating more NVT.

 

[Faramir]

Re: NVT - Navitas

I still hold. Brought in around $5.08 July 2014 when they lost that Macquaire contract. The smarter ones sold while NVT hit their highs many months ago (just before last year's VET crisis). (I am not smart). I haven't topped up because I spent what I had on CCP. Topping up now would seem sensible if only I had the funds?

With the fall of Aussie dollar, wouldn't our educational system be more attractive? I think that NVT is doing OK overseas as well.

I saw Rod Jones on a Peter Switzer interview last year. I was impressed with him. The world needs more education and some will pay for it. Some will need bridging courses and additional assistance - this is what NVT does best.

Damm you VET - I was tempted to buy you. All you did is bring the whole sector down. Some of us are not smart to know the difference between VET and NVT. Some people must think that you are all one and the same. So let the market punish NVT as well. NVT might be tertiary and VET might be vocational educational providers but what is the difference when someone can send all of them on a downward slide.

Now I will have to wait a very long time. I am not smart enough to know when to sell. Too dumb and poor to buy in the dips.

Sorry for my rant. Everyone can provide expert commentary. Please let me provide simple man's commentary.

 

[Muschu]

Re: NVT - Navitas

I still hold. Brought in around $5.08 July 2014 when they lost that Macquaire contract. The smarter ones sold while NVT hit their highs many months ago (just before last year's VET crisis). (I am not smart). I haven't topped up because I spent what I had on CCP. Topping up now would seem sensible if only I had the funds?

With the fall of Aussie dollar, wouldn't our educational system be more attractive? I think that NVT is doing OK overseas as well.

I saw Rod Jones on a Peter Switzer interview last year. I was impressed with him. The world needs more education and some will pay for it. Some will need bridging courses and additional assistance - this is what NVT does best.

Damm you VET - I was tempted to buy you. All you did is bring the whole sector down. Some of us are not smart to know the difference between VET and NVT. Some people must think that you are all one and the same. So let the market punish NVT as well. NVT might be tertiary and VET might be vocational educational providers but what is the difference when someone can send all of them on a downward slide.

Now I will have to wait a very long time. I am not smart enough to know when to sell. Too dumb and poor to buy in the dips.

Sorry for my rant. Everyone can provide expert commentary. Please let me provide simple man's commentary.

I've met Rod Jones and he is very committed to Navitas. However I see several issues ahead.. Succession planning when Mr Jones retires; vastly increasing competition in North America; poor USA staffing retention; developing Asian nations being more likely to cope with their own aspirational students at home; visa uncertainties; currency fluctuations; ....

I bought NVT at the float. I increased my hold as they grew but then sold off over a period and have had none for the past 2 years.

Not for me anymore.

 

[tinhat]

Re: NVT - Navitas

The problem I have with the Australian tertiary education and vocational training sectors is I don't believe they are very good quality.

 

[galumay]

Re: NVT - Navitas

The problem I have with the Australian tertiary education and vocational training sectors is I don't believe they are very good quality.

Compared to what? A lot of our tertiary institutions have a very good reputation and rating in international terms. Not sure what objective ratings there are for our vocational training.

The secondary issue is whether that actually has any major relevance to the quality of the businesses from an investment perspective.

 

[Klogg]

Re: NVT - Navitas

The problem I have with the Australian tertiary education and vocational training sectors is I don't believe they are very good quality.

This is the problem most investors have at the moment, hence the industry wide declines on markets.

But finding educational institutions that do deliver quality should allow you to buy them at a cheap price. Do you think NVT fits the bill?

 

[Klogg]

Re: NVT - Navitas

NVT is on the periphery of Vocational education - just cooling their heels.

If you go to about the 3 Hour 5 Minute mark there is a interesting answer to a question regarding the VET sector. If you want to know what quality and ethics in education and looks like and you have three hours to spare you could watch from the start.

http://edge.media-server.com/m/p/2nj6h35o

ps

Buying quality is boring compared to the swings in this sector lately but if you are looking for a passive long term investment there is no substitution for quality.

For mine (a very long term view) - Association with VET sector, Macquairie contract loss and Various governments around the world playing around with visa entry requirements has produced a good environment for accumulating more NVT.

The one thing that I found very interesting in that presentation was management's confidence in the SAE business. They admitted it took them longer to get it to the same state as all other NVT units, but growth should be delivered from here.

Can't remember if I've mentioned this, but there was also a mention of closing some schools to increase returns to shareholders

 

[Faramir]

Re: NVT - Navitas

Hi klogg

Last sentence of Post 281 - top of this page. 29 October 2015
My post 279 - I commented on a news release as well. 17 Sept 2015

 

[tinhat]

Re: NVT - Navitas

Do you think NVT fits the bill?

I'll have a closer look. I did own NVT a few years back. I was not impressed by the SAE acquisition.

I wish I could say that the only stocks in my portfolio are those in which I have genuine belief in the quality and value of the business but alas that is so far from the truth it, in times like these, it makes me despondent. I want to profit from investing in businesses that genuinely do good. Perhaps I don't have enough capital to be so picky.

[edit]
I was involved in the tertiary education sector (universities only) quite a few years ago as a consultant for a bank providing finance to students and I was very disillusioned - and that was twenty years ago, well before the outrageous situation the entire sector is in now.

 

[craft]

Re: NVT - Navitas

poor USA staffing retention

Hi Maschu.

What is the source of this information?

 

[VSntchr]

Re: NVT - Navitas

1H16 result out today. My quick summary:
UP margins begin to feel the heat with the Macquarie loss. Next half will bear big loss.

SAE and PEP seem to be firing at just the right time for NVT, with margin expansion looking like it will give them a very good chance at hitting FY guidance.

The buy back is interesting. I wonder whether they intend to buy straight away, or to keep it as firepower in the event of any short term implosion come the full impact of the MQC loss.

EDIT: just rewatched the question time from the linked investor day video (thanks craft). The explanation on the journey of SAE is fantastic and certainly gives confidence going forward. This 1H result is certainly evidence of what Rod says "We expect significant improvement in margins going forward (SAE) and this year will be the first year where that is quite obvious".

 

[notting]

Re: NVT - Navitas

The market likes the buy back and also the English teaching and professional services for globalizing emerging markets as a potential expanding money spinner.

 

[Muschu]

Re: NVT - Navitas

Hi Maschu.

What is the source of this information?

Just noticed this...

I have visited some of their campuses in the States, around Boston in particular.

[Don't work for them ]

 

[Muschu]

Re: NVT - Navitas

I felt very uncomfortable with the growth in North America announcement.

It would have been more transparent to "divide" the USA from Canada - as I suspect most of the growth is in Canada.

Better still would be an announcement outlining the growth in each and every partnership, but NVT does not seem to want to do that.... Commercial confidentiality perhaps?

But certainly a Canada / USA breakdown is a reasonable ask....

 

[craft]

Re: NVT - Navitas

I felt very uncomfortable with the growth in North America announcement.


It would have been more transparent to "divide" the USA from Canada - as I suspect most of the growth is in Canada.

Better still would be an announcement outlining the growth in each and every partnership, but NVT does not seem to want to do that.... Commercial confidentiality perhaps?

But certainly a Canada / USA breakdown is a reasonable ask....

Not sure why 18% YOY growth would make you very uncomfortable.

What exactly in the announcement re-enforces your suspicions?

The announcement does say a full update on Northern Hemisphere University Program enrolments will be released in early March. From memory its not unusual for NVT to release market sensitive enrolment numbers upfront with more detailed information presented later in analyst presentations. I have always found NVT forthcoming with the information I feel I need as a shareholder, but I don't need the minute detail of specific university breakdowns.

 

[Muschu]

Re: NVT - Navitas

Not sure why 18% YOY growth would make you very uncomfortable.

What exactly in the announcement re-enforces your suspicions?

The announcement does say a full update on Northern Hemisphere University Program enrolments will be released in early March. From memory its not unusual for NVT to release market sensitive enrolment numbers upfront with more detailed information presented later in analyst presentations. I have always found NVT forthcoming with the information I feel I need as a shareholder, but I don't need the minute detail of specific university breakdowns.

Specific detail would show strength of current contracts....

There are far more competitors in the USA than was the case when NVT finally got into this market some years ago.

Anyway just my opinion... NVT is headquartered in Perth WA and will need to be right on the ball to maintain their current position in a massive North American market. Maybe they will...

Not holding and don't plan to... As said before, I got in at the float and did well. I do follow the stock as a result.

 

[Klogg]

Re: NVT - Navitas

Ultimately, nothing to see here... But for those that are interested, here's a few points I found noteworthy:

- UP: "Equivalent full time student units (EFTSU) grew by 0%, 2% and 0% globally for each semester respectively in the year compared to pcp. Excluding these transitioning colleges EFTSU grew 2%, 4% and 11% globally for each semester. Average fee growth was ~5% across the Division."
Inflation is so low throughout the world, yet NVT can grow fees by 5% a year without any issues...

- SAE: Strong revenue growth, EBITDA growing by the same amount. Some operational leverage not showing here as a result of:
"SAE announced the proposed closure of four sub-scale colleges."

- A reversal of negative working capital structure shown in the closure of two large UP agreements, ultimately effecting cash flows:
"Operating cash flows of $125.8m for the year ended 30 June 2016 were down by 11% on the prior year (FY15: $141.8m) principally due to increased payments for teaching and marketing only partially offset by higher customer receipts. "
This is also shown in the "Deferred Revenue" line, which decreased by $8m ($272m from $280m the previous year)

- DRP back in play: " The Navitas Dividend Reinvestment Plan (DRP) will again be offered at no discount to market."

- Dividend amount maintained at 19.5cps. They're capping the dividend to the amount they can pay out with required franking credits. I like this, as it forces them to re-invest the remainder at higher ROC (21.6% currently, as listed below)

- Not sure if these are significant efficiencies, but overhaul of IT systems:
"An overhaul of the Group’s core IT infrastructure is being pursued to enable faster decision making, powerful analytics, efficient processes, and improved operations. This includes the global upgrade of learning management systems, and the continued rollout of Navigate, a Navitas student management system. "
(Navitas have a good track record in this area, as has been discussed in previous webcasts)

- Even though the competitive advantages are maintained and shown through ROC, the Incentive targets were not met:
"Whilst Navitas achieved an increase in EBITDA during the year, the growth in EVA by the Group fell short of the target set by the Board. As a result the Group’s return on capital employed for the year to 30 June 2016 fell to 21.6% "
(If I ran a company that achieved an ROC of 21.6%, I'd be happy to pay bonuses - Rod has high standards it seems)


Guidance seems to indicate a similar result next year. However, once the UP closures are completed, I can only see them increasing earnings...

 

[Faramir]

Re: NVT - Navitas

Still happy to hold. Thank you Klogg for your comments. I did nothing when NVT sat beneath my purchase price. I didn't average down, didn't buy the dips. Now it sits above my purchase price. When they did those Share Buybacks early this year, it convinced me stay still and hold.

 

[robusta]

Re: NVT - Navitas

Thanks Klogg, NVT is still a high quality business with a long runway of growth ahead in my opinion. I also like the way they have operated the buy back, $5.18 highest price paid $4.51 lowest price.

As a long term holder I actually hope it dips back into 'the buy back zone'