Shares in IDP Education surged more than 20% yesterday after the struggling group raised a lot more money than originally planned. Kathmandu has also completed the institutional component of its deeply discounted $200 million capital raise, raising gross proceeds of around $NZ154 million ($150 million).
IDP Education (ASX:IEL) is a provider of international student placement and English language testing services. It also owns English language schools in South East Asia and organises educational events and conferences. IDP’s strong result for the six months to December 2016 saw a spike in its share price, and confirmed our faith in this high quality business.
IDP Education listed on the ASX under the stock code IEL in the latter part of last year. Education Australia, which comprises 38 Australian Universities owns 50 per cent of IDP, and has agreed to escrow this shareholding until the release of the FY 2016 results in August.
Sam Twidale, Portfolio Manager for the DNR Capital Australian Emerging Companies Fund, explains why he believes recent volatility in equity markets has provided some excellent opportunities in the smaller cap sector.
The broker has reviewed its position on IDP Education post equity raising, envisiging a three-stage recovery beginning with localised lockdowns and travel restrictions extending lower volumes, followed by lockdowns easing but travel restrictions lagging in FY21, and finally normalisation in FY22 with IDP taking market share.
IDP Education was travelling along fine at the beginning of the year before the wheels fell off in March, a trading update revealed. This has prompted a $240m capital raising and debt refinancing. Morgans has cut earnings per share forecast by over -40% and does not expect a full recovery until FY22.