Stadio

5 July 2020 By PDSNET

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 4th 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 30th 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:

Stadio: August 2018-July 2020. Chart By ShareFriend Pro

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 1st 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.



Share this article:

PDSNET ARTICLES

Fundamental Context

The assessment of shares is divided into fundamental analysis and technical analysis. The fundamentalist is trying to answer this question, “How good will this company be as a payer of dividends in the future ?” This requires an in-depth study of everything about the company starting with its most recent financials.

Market Action

In general, we encourage investors to take a medium to long-term view of the market and not to get involved in “trading” or intra-day buying and selling, especially in highly geared derivative instruments.

However, watching the intra-day progress of the S&P500 index and other indicators

Market Update

The S&P500 has virtually completed its seventh “mini-correction” on Friday the 4th of June 2021, since the V-bottom of the pandemic in March 2020. It exceeded its previous all-time high closing level of 4232.6, reaching an intra-day high of 4233.45. That it would probably go to a new record high was indicated by its record intra-day high

The Confidential Report - June 2021

America

In the previous Confidential Report on 5th May 2021, when the S&P500 index was at 4167, we suggested that it was probably due for a correction. Over the last month we have watched as a correction unfolded in that index. However, it turned out to be only a mini-correction of just 4% - and as we pointed out in our article, 

Massmart

Almost nine months ago we suggested that you take an interest in two shares – Massmart and Blue Label. We suggested that they would benefit from any sort of recovery in the South African economy. At the time, investors were running scared because of the fall-out from the pandemic and the resulting lockdowns. We quoted that famous saying by Warren Buffett –

Correction

Since the V-bottom of COVID-19 in March last year, the S&P500 index has risen an amazing 86,6% without any major correction. There have been 7 “mini-corrections” of varying sizes, including the current one (which is not yet over), but in each case the market has quickly bounced back and resumed its inexorable upward trend. Consider the chart:

Rand Hedges

One of the complicating factors for a South African investor is the volatility of the rand. Many of our leading shares derive a large percentage, or even all, their income from their interests overseas – which means that their earnings are directly impacted by the strength or weakness of the rand. So, it becomes essential that you formulate a view on the

The Confidential Report - May 2021

America
The US economy grew at an annualized rate of 6,4% in the first quarter of 2021 – which was much faster than expected. Gross Domestic Product (GDP) was $19,1 trillion – which can be compared to the $19,3 trillion of the December quarter of 2019 - before the pandemic took hold. This shows that the economy is now virtually back to pre-COVID-19 levels. The

Top of the Market Signs

In last week’s article, 12-Year Bull Trend, we pointed out that the bull trend was rising exponentially and ultimately that could only end with an exponential collapse. We said that the exact timing of that collapse was very difficult to assess.

You may also recall our article of 23rd January