Delivering strong results
- Prior to the pandemic the business had commenced a strategic shift in their business model with a renewed focus on technology and corporate centres. The pandemic has seen the rapid uptake of online lessons and hybrid learning has become the norm at Kip. Corporate centre revenue also increased by 115% in FY22, and this strategy is discussed in detail later in this blog.
- Kip McGrath purchased Tutorfly in the US. Tutorfly is a marketplace matching tutors with students. This business has performed above expectations since its purchase and offers free upside in our valuation.
- The company is set to benefit from governments allocating funding to tutoring companies to bridge the learning gap. In Australia Kip McGrath won a tender for an NSW Government contract and is bidding for further tenders. The Biden administration also pledged $120bn to bridge the learning gap created by the pandemic and Tutorfly has been successful in winning part of this funding.
- A new learning management system (LMS) is being rolled out this half and will be exclusive to gold partner franchisees. It is expected that silver partners will transfer to gold partners to access the new LMS.
McGrath Invests in Technology
Corporate Centre Strategy
Kip McGrath Outlook
Source: KME Annual Reports & Oracle Forecast
If Kip McGrath continues to trade on its current Price-to-earnings (P/E) of 24x with next year’s earnings, then the share price will trade at $1.90, a 120% upside. This reasonable valuation also provides a good risk/reward ratio, protecting the downside in the current volatile market. Kip McGrath has several tailwinds that it can leverage over the next few years, and we believe the current share price provides a great risk/reward opportunity for shareholders willing to be patient.
Get in touch with us today for complimentary consultation to discuss your financial position and we can provide you advice tailored to your unique situation.
Written by Jack Magann