Mid Cap Darlings – Curro Holdings Limited


Mid Cap Darlings – Curro Holdings Limited


Published Date: 2019-03-13 | Source: INCE|Community Weekly | Author: Sifiso Skenjana

Mid Cap Darlings – Curro Holdings Limited

Business Model: Private education provider Curro is home to education brands Curro Independent Schools, Curro Castle Nursery Schools, Curro Select and Curro Academy Schools. The company has grown both by acquiring existing schools as well as development of new learning institutions. The group has grown from having 24 schools and 4200 learners in 2011 to 139 schools and 50 691 learners in 2018 - with a 16% annual compound learner growth rate (CAGR) over four years. The bulk of their learners come from the Curro and Curro Select brands, with 34 460 learners in in 2018.

Macro Landscape: Consumers (parents) continue to face downward pressure on their income. The recent budget speech announced no inflationary adjustments to the tax brackets, suggesting that they will be subject to higher tax in the 2019/2020 tax year. The Curro school fees have increased by an average of 9%, far outpacing the inflation rate which came in at 4% in January 2019. This will continue to create downside risk, for the revenue by parents who are already feeling stretched.

Results: Curro has demonstrated its ability to generate earnings sustainably, achieving an earnings (EBIDTA) CAGR of 29% over the last four years. The group has also shown mettle in it's ability to attract new pupils though sustained higher enrolments.

Growth Prospects: The private education space is increasingly getting more competitive with newer entrants like Nations Schools, SPARK Schools and Pioneer Schools challenging for their place with new and innovative learning methods and value propositions. The demand for private education however continues to hold strong, particularly in Gauteng and the new entrance pose no material threat on Curro's revenues in the medium term. Education as a "good/service" tends to not respond significantly with changes in economic conditions (often referred to as inelastic demand), which makes the sector relatively defensive and appropriate for long term investment.

About The Analyst: The Mid Cap Darlings is brought to you by the Awkward Economist - Sifiso Skenjana. He has a breadth of experience in portfolio management, economic research and investment strategy and management consulting. He is founder and financial economist at AFRA Consultants. He is currently pursuing his PhD.


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