Mark du Toit, portfolio manager at OysterCatcher Investments, on what the smart money is doing
03 October 2024 - 05:00
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Mark du Toit, portfolio manager at OysterCatcher Investments
Buy: Stadio
The private tertiary education specialist is a great growth story. The business was separated out from private schools business Curro several years ago, and with its array of tertiary offerings it has grown from 26,000 students in 2018 to 47,000 this year; it is aiming for 100,000. The Durbanville campus in Cape Town is under construction and will be ready for the 2026 student intake. The mix of contact learning and distance learning gives Stadio the ability to scale up over the next decade. Adding new courses and more students to the network means that revenue can grow double digits and earnings can grow above 20% a year. This an attractive business to own.
Sell: Barloworld
Barloworld recently issued a statement that “the company submitted an initial notification of voluntary self-disclosure to the US department of commerce Bureau of Industry and Security regarding potential export control violations that the company is currently investigating, relating to sales of certain goods to its Russian subsidiary”. It is commendable that Barloworld made the disclosure but it also means that there was a potential material break in internal controls. Additionally, the share is trading at an elevated level since going under a cautionary in April. The risks don’t justify the price with potentially more downside ahead. A just released trading update advised that group revenue dipped 7.4% in the 11 months to end-August, with earnings before interest, tax, depreciation and amortisation falling 14%.
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BROKERS’ NOTES: Buy Stadio, sell Barloworld
Mark du Toit, portfolio manager at OysterCatcher Investments, on what the smart money is doing
Mark du Toit, portfolio manager at OysterCatcher Investments
Buy: Stadio
The private tertiary education specialist is a great growth story. The business was separated out from private schools business Curro several years ago, and with its array of tertiary offerings it has grown from 26,000 students in 2018 to 47,000 this year; it is aiming for 100,000. The Durbanville campus in Cape Town is under construction and will be ready for the 2026 student intake. The mix of contact learning and distance learning gives Stadio the ability to scale up over the next decade. Adding new courses and more students to the network means that revenue can grow double digits and earnings can grow above 20% a year. This an attractive business to own.
Sell: Barloworld
Barloworld recently issued a statement that “the company submitted an initial notification of voluntary self-disclosure to the US department of commerce Bureau of Industry and Security regarding potential export control violations that the company is currently investigating, relating to sales of certain goods to its Russian subsidiary”. It is commendable that Barloworld made the disclosure but it also means that there was a potential material break in internal controls. Additionally, the share is trading at an elevated level since going under a cautionary in April. The risks don’t justify the price with potentially more downside ahead. A just released trading update advised that group revenue dipped 7.4% in the 11 months to end-August, with earnings before interest, tax, depreciation and amortisation falling 14%.
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Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.