Wednesday 11 January 2012

Investors taking a punt on education as Navitas finds major backer

Hyperion Asset Management - which manages more than $3 billion in Australian equities - has lifted its stake in education provider Navitas to 6.4 per cent from 5.2 per cent.

NAVITAS operates pathway colleges and managed campuses and is Australia’s largest English language provider. The group delivered more than 13 million teaching hours to 83,000 students in 23 countries in 2011 but is targeting a bigger bite of the international tertiary education cherry, a sector which is set to grow to 8.2 million enrolments by 2025 from a current 3.3 million.

“Compared to a few years ago, it’s more expensive for international students to come to Australia but relative to other major regions like the US, Britain and Canada, it’s still attractive from both a price and security point of view,” Hyperion senior portfolio manager Joel Gray told Deal Journal Australia, describing the attacks on Indian students between 2005 and 2009 as non-recurring.

The fund manager is taking advantage of the market’s focus on the decline in student enrolment which were down 9.2 per cent on the prior period in the third semester of 2011.

Though Navitas itself has welcomed the government’s acceptance of all 41 recommendations of the Knight review into an inbound student visa program, it does not expect a rebound until the beginning of 2013.

“[It] now presents a series of measures which will signal to the world that Australia values international students and wants to welcome them back,” Navitas chief executive Rod Jones said last year.

The Knight review was instigated to provide the government with guidance on how to enhance the continued competitiveness of the international education sector and to strengthen the integrity of the student visa program.

Hyperion is also confident in Navitas’s US rollout model, where it intends to partner with established universities to create a footprint in one of the world’s largest education markets. It is currently associated with the University of Massachusetts in Dartmouth, Lowell and Boston, the University of New Hampshire and Western Kentucky University.

Navitas is currently trading at $3.31 a share and has a market capitalisation of $1.2 billion.

Mergers and acquisitions activity in the education sector has recently experienced an upswing.

In November, Pearson announced it would acquire NASDAQ-listed Global Education and Technology Group in China for a $250 million. The company is a provider of test preparation services for students in China who are learning English.

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