Emerging Childcare stock with upcoming catalyst
K2 Asset Management
Drawing on K2’s eighteen years of investment experience, we determine the best opportunities by using a combination of top-down industry research along with bottom up fundamental analysis. Meeting company management also plays a key role in the investment process as does establishing expectations from the investment community. Identifying a catalyst can come in many forms and over various time frames. However the focus will always be on specific event/s that will drive the market to re-rate the stock. Companies can remain undervalued for long periods, and therefore timing will also play a key part of our investment approach.
Think Childcare Limited as a company is well placed to deliver strong shareholder returns. The company owns, manages and operates 35 premium childcare facilities with a clear focus on centres located within 100km’s of Melbourne CBD. The company recently delivered a strong set of results for the Half Year 2016 of Revenues +19% and Profits +45%. The key growth drivers come from their successful strategy execution, targeted at improving occupancy and efficiency in its current portfolio, complemented by further acquisitions. With favourable industry dynamics and a proven strategy, management has the opportunity to grow the business substantially. The company trades on a 1year forward PE-14x and a ~4.5% Fully Franked Dividend Yield. We feel this represents compelling value and the ongoing delivery of earnings growth will prove to be the catalyst for a re-rating.
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Nick is Senior Portfolio Manager for K2 on stock selection within both the Australian ARF and Asian ARF. He previously held roles within Macquarie Bank, BT Alex Brown and JM Financial Group. Nick holds a Bachelor of Economics and Finance from RMIT.
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