“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
