Curro results, growing fast

On Friday we received results for the year ending 31 December 2012 from Curro holdings as the company for the first time since listing, made a profit. I still wouldn't be worried by profits at this stage, they are in huge expansion mode. See below from the presentation which pretty much sums up what has been a very good year for the company.


"Curro listed on the Alt-X just more than 18 months ago. On listing, the Company had 5 557 learners in 12 schools. In the pre-listing statement the Company envisaged that by the end of 2013 it would have 17 schools with 9 594 learners. To date the Group has grown to 26 schools and 20 840 learners across 7 provinces."

The reason for the growth they say is a massive demand for affordable private schooling. That makes sense. The faster they can roll out schools the better because at this stage demand far outweighs supply. During the year they spent R223 million on existing campuses, developed 4 new campuses in Bloemfontein, Cape Town, Krugersdorp and Centurion at the cost of R237 million and bought 8 schools around the country for R322 million. They managed to raise this cash through us the shareholders (R800 million) and the OMIGSA partnership (R440 million) which I have spoken about in detail before.


Revenues more than doubled to R356 million which resulted in a headline profit of R15 million or 7.1c a share. Trading at R18 there is no point valuing this company on an earnings basis. There is a decent property underpin of R1.2bn but that is still far off the R4.3bn market cap.

It is all about the future for this company and how quickly they can roll out schools to meet that massive demand. To do this they need financing which is why listing has been so beneficial for these guys. On releasing these results they announced another rights offer.


"Shareholders are hereby advised that Curro intends to raise R605 879 376 by way of an underwritten renounceable rights offer ("the Rights Offer") of 50 489 948 new Curro ordinary shares ("Rights Offer Shares") to qualifying shareholders at a subscription price of 1200 cents per Rights Offer Share, in the ratio of 21 Rights Offer Shares for every 100 Curro ordinary shares held on the Rights Offer record date, being Friday, 12 April 2013."


Yes you are getting diluted as a share holder but at least you know your money is being put to good use. I really do feel the potential for this stock is massive. There are many independent schools out there which can be bought and the there are millions of potential learners, desperate for quality affordable education. I know it is sad but this is where the private sector can benefit for the state's failure. We have seen it with the private hospitals, medical insurance, Multichoice, the network providers and many more. If you are already a shareholder I would advise you follow your rights, PSG who own 52.84% have already committed. If you are not a shareholder, I would be happy to add to this stock at present levels, but you are going to have to roll with the punches.