It had to happen. When considering the heady market ratings applied to private education companies like AdvTech and Curro — and especially the latter — it’s a wonder it took so long for other contenders to come to market.
This week Pembury Group Ltd confirmed it had approval from the JSE to apply for a listing on the Alternative Exchange (AltX).
The last time I spotted Pembury Group the company was rumoured to be listing its retirement lodge business.
It seems the company chanced upon the private education caper. According to a press statement, a property was acquired in 2014 which was more suited for a school.
This led to the establishment of PLG Schools — which now consists of seven campuses with 19 schools (pre-primary, primary and high school).
The official line is that the listing of PLG Schools is the first step, and the retirement lodge portfolio will potentially be acquired at a later stage (dependent on investor appetite for the retirement segment).
I am always a tad suspicious of listings that appear to be cashing in on an investment trend, and private education — for good reason — is a red-hot sector at this point. I’m sure excitable retail investors will pay attention but I’ll reserve judgment until I see the full prospectus for PLG.
The only financial information provided on the press release was that PLG Schools generated revenue of over R19m and Ebitda of R7.3m in the year to end-February.
The press statement certainly does try to tick all the boxes — the schools bridge the financial gap between government school fees and the "elite" independent school fees (fees are R18 000-R54 000 a year) and there are plans to shift into tertiary education.
Then there’s the expansion drive with a short-term goal of three new campuses next year and the longer-term goal of 19 campuses and 55 schools by 2022. The rub is that PLG Schools aims to raise around R140m in external capital to fund the growth aspirations of the group. That’s quite a sum for a fledgling company with a turnover of less than R20m, and it will be interesting to see if a minimum capital-raising amount is set.
While I see retail investors putting up their hands, I wonder whether institutional investors will be at all interested. Pembury is not a familiar brand and when I searched for "Pembury" on the Web I did see there was a small planning hitch earlier this year with the Ballito Academy.
Obviously much will depend on the pricing of the scrip to be issued — and this exercise will be extremely interesting to gauge, with AdvTech commanding a trailing earnings multiple of 23.5 times and Curro a mind-blowing 131 times.
Buyback or dividend
Claddings group Mazor encouragingly reported a "busy and largely profitable six months off the back of awakening market activity, particularly in our home base of Cape Town".
Revenue was up by a quarter to R306m with headline earnings up 45% to R24m or 21.7c/share. With cash-on-hand of R90m (equivalent to 90c/share) there might be some conjecture among Mazor shareholders as to whether there will be a bumper dividend.
Then again, with the share price sitting at 180c, the temptation to pursue a share buy-back must be fairly strong too.
Bearing up well
Industrial supplies group Invicta, which has Bearing Man as a central operational cog, came through the six months to end September with operating margins reassuringly intact.
Of course, there would be much more intrigue around the cautionary notice issued just after the release of the interim numbers.
No detail was provided in the terse advisory to shareholders, but with Invicta holding more than R700m in cash on its balance sheet an acquisition (perhaps another global thrust) seems most likely.