Our opinion on the current state of ADH

ADvTECH (ADH) is a prominent player in the commercial education sector in South Africa, operating in both schools and tertiary education divisions. The schools division, comprising institutions such as Crawford, Trinity House, and Abbots, historically formed the backbone of the company's operations. However, increased competition in the schools sector has led to margin pressures in recent years, shifting the focus towards the more profitable tertiary division.

The tertiary division, including Varsity College, Rosebank College, and specialized tertiary offerings, has emerged as the primary profit driver for ADvTECH. The acquisition of Monash College with its IIE campus has significantly bolstered this division, adding 6,500 students and modern facilities to the company's portfolio.

In its financial results for the year ending December 31, 2023, ADvTECH reported a commendable 13% increase in revenue and a 19% rise in headline earnings per share (HEPS). Operating margins in the education divisions improved, driven by operating leverage, although net finance costs increased due to additional leases and higher borrowing costs.

From a technical standpoint, ADvTECH's stock has been on a strong upward trend since May 2020. With a price-to-earnings ratio (P/E) of 16.65, the stock is deemed relatively cheap, suggesting further upside potential. Moreover, the company's solid market position, coupled with its defensive nature in times of low economic growth, makes it an attractive investment option, especially considering parents' willingness to prioritize education spending.

Overall, ADvTECH appears to be a solid blue-chip company with promising medium-term prospects. Any improvements in the South African economy are likely to directly benefit the company, further enhancing its growth trajectory.