ARTICLES

Stadio

When it listed on the JSE, Stadio was one of those shares which was widely perceived to have almost unlimited “blue sky” potential. Riding on the back of Curro’s success and Chris van der Merwe’s (the CEO at that time) reputation, it was thought that Stadio would do as well as Curro, if not better. Like Curro, it was thought that there was a virtually no limit to Stadio’s potential to expand into every avenue of tertiary education. This perception propelled the share to an unheard-of price:earnings multiple (P:E) of over 300 on 4^th September 2018 – surpassing even Curro’s December 2015 record of 245.

At the time we suggested that such multiples were simply unsustainable, no matter how good the potential, and advised clients to stay away. Over the next two-and-a-half years, the reality gradually manifested in the share price as it sank back to more reasonable and believable levels.

Most of the very enthusiastic investors of late 2018 eventually gave up on Stadio and took their money elsewhere. But the irony is that Stadio’s “blue sky” potential is still there. There is a massive shortage of high-quality, career-enhancing tertiary education in South Africa. Our state-funded universities and other tertiary colleges simply do not offer the quality of education that they once did – leaving a gaping opportunity for the private sector to step into the gap.

But what has really revived Stadio is the sudden realization that about 80% of its students are educated online. Of its 31000 students, 25000 do not attend any brick-and-mortar campuses. They get their courses online. This has a special relevance in the post-COVID-19 society that we live in today. Thousands of people have lost their jobs and are looking to up-school themselves so that they can earn a living.

In its recently published trading statement for the six months to 30^th June 2020, Stadio reports a sharp increase in the number of students enrolling for its Post-Graduate diploma in accounting through its subsidiary CA Connect. Consider the chart of the share’s price:

Here you can see the extraordinary heights which Stadio reached in September 2018 at a P:E of 300, and how the share drifted down to a more a much more reasonable P:E of around 10 following the initial scare of the pandemic in March 2020. That was followed by the share breaking convincingly up through its long-term downward trendline, a break that was confirmed by its trading statement of 1^st July 2020.

We believe that the share, even at a P:E of over 23, is underpriced because it is uniquely positioned to benefit from the post-COVID-19 situation.

DISCLAIMER

All information and data contained within the PDSnet Articles is for informational purposes only. PDSnet makes no representations as to the accuracy, completeness, suitability, or validity, of any information, and shall not be liable for any errors, omissions, or any losses, injuries, or damages arising from its display or use. Information in the PDSnet Articles are based on the author’s opinion and experience and should not be considered professional financial investment advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. Thoughts and opinions will also change from time to time as more information is accumulated. PDSnet reserves the right to delete any comment or opinion for any reason.

PDSNET ARTICLES

Smart Local Investors

The last two months have been wild on the markets – mainly because of Trump’s ill-advised, on-again, off-again tariff policies. The issue now is:

Will this morph into a full-blown bear trend? Or is this correction almost over?

From his election victory on the 6^th of November 2024,

Jerome Powell

The Federal Reserve Bank (“the Fed”) is completely outside the control of the President and Executive Branch of the US government. The chairman of the Fed is appointed for a renewable 4-year term by the President. The President cannot remove the Chair without cause. The current chairman, Jerome Powell was appointed by Trump during his first term as President and reappointed by

Uncertainty Soars

Investors are by their very nature risk takers, but they are always trying to reduce the risk which they have to take to a minimum. Donald Trump, with his threat of an international trade war and his on-again, off-again tariffs has significantly increased the level of risk in markets across the world. This can be seen in the extraordinary volatility in the S&P500

Liberation Day

Trump has done the unthinkable. He has deliberately engineered the collapse of the US and world stock markets in the nonsensical belief that somehow an international trade war will make Americans richer. Nothing could be further from the truth. His actions have taken the S&P down from its all-time record high of 6144.15 on 19^th February 2025 to Friday’s

The Creation of Money

The money supply of a country is a symbol of the goods and services of that country. Obviously, if the size of the money supply is increased more rapidly than the real growth of its economy, then you have more money chasing the same goods and services, resulting in rising prices. Since, over the long term, the only organisation that can create money is the government,

V-Bottom is likely

The 10% collapse of Wall Street, which is a direct result of Trump’s random policy of on-again, off-again tariffs, is very similar to what happened to Wall Street in February/March 2020 when investors tried desperately to accurately discount the impact of the COVID-19 pandemic.

Normally, corrections in the market

The Trump Correction

It is relatively unusual for the activities of American presidents or what they say to have an impact on the New York Stock Exchange, especially during their first 100 days in office. Trump, however, is the exception. His confused, on-again, off-again rulings on tariffs have rattled the market. Markets hate uncertainty and even Trump himself doesn’t appear to know exactly

Dividends

Investors know that the return on a share is made up of a capital gain plus the dividend. Private investors are mostly attracted to the prospect of making a capital gain on the shares which they buy and do not often consider the dividends. What they perhaps do not realise is that a capital gain is actually just the dividend in a different form.

Quarterlies

One of the major differences between the US equity markets and the JSE is that listed companies in America are required to report every 3 months, not every 6 months as they are on the JSE. The quarterly reports of the S&P500 companies are closely followed by investment analysts and predictions are made for their profits.

Gold's Record Run

On Friday last week, gold reached a new all-time record high of $2871.42 per ounce. Its gain in rands has been even more impressive rising from less than R1000 per ounce in August 1992 to last Friday’s close of R52864.85.

In our Confidential Report of March