weekly wrap 25/08/17

“Madness is rare in individuals – but in groups, parties, nations, and ages it is the rule”

– Friedrich Nietzsche


Stock news

The stock that caught my eye this week was the full year results from Redhill Education. I’ve mentioned this company before (and full disclosure it’s my largest personal investment) & their recent set of results blew me away:

  • Revenue $41.5m vs. $40.2m guidance (+46% YoY growth)
  • EBITDA $3.9m vs. $3.6m guidance (+158% YoY growth)
  • Cash flow from operations +$5.1m
  • Inaugural dividend of $0.02

This is the result that I have been awaiting for over 2 years as the second half of FY17 highlighted the unencumbered earning power of the enlarged group. Second half EBITDA came in at $3.3m and while it is seasonally stronger due to the March student intake, I reckon they’re on track for $6m+ in EBITDA next year. If we assume a fair EV/EBITDA multiple is ~8-10x then the stock is worth around $2 on next years earnings.

However, knowing the CEO Glenn Elith quite well, I would not expect the growth to stop there. They still have plenty of room to expand within their existing Melbourne footprint and the Coder Factory is still in its infancy with strong secular tailwinds and minimal competition.

It remains a core holding for myself and my family investment company and I have no plans to sell in the medium term.


Weekly reading (links)

Steve Johnson from Forager on why he’s a happy renter

Brent Beshore reflecting on the past decade running his own company

A look into Sam Zell’s investment philosophy

July update from Sapient Capital

Old article from JP Morgan on how higher interest rates effect property

Mid year update from Saber Capital

An article on the out-performance of Aussie micro-cap managers

Vintage value discussing why Warren Buffett closed his investment partnership

Must listen podcast from Investors Field Guide with Pat Dorsey

A really interesting article with a great discussion on the declining mobility rate of Americans

An open letter to Aris from Long Cast Advisors

How GEICO went from a deep value investment to a compounder for Ben Graham

Nassim Taleb on being rational about rationality

Saber Capital pitches Tencent

Great article on why humans hate uncertainty

Maynard Paton discussing Record Plc which I’ve previously discussed

Another article highlighting how specific stocks can perform regardless of political uncertainty

Oddball stocks on being public vs. private

Travis Wiedower on why he likes founder led companies

A good article on the relatively unknown Frances Chou

A great find from Clayton Young – San-A Co


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