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Views Article – Sharenet Wealth

Share Picks

Pembury Lifestyle Group IPO

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Sharenet Securities invites you to participate in the Private Placement of shares in Pembury Lifestyle Group.

Pembury plans to list on the AltX of the JSE on the 31 March 2017. It will be another listed player in the affordable private education sector, joining the likes of Curro and Advtech.

The affordable private education model has proven to be very attractive. The Curro share price has experienced staggering growth, up over 470% since listing in 2011. Advtech is up over 160% over a similar period. It is no surprise that Pembury is looking to list and take advantage of the positive momentum in the sector.

Brief overview:

The Group originally focused on retirement villages but entered the education sector in 2014. The business model is very different to that of its competitors. While most companies in the sector have had to build expensive schools, Pembury has focussed on converting premises that had alternative uses, into schools and classrooms. It has not bought the premises, but leases them. Therefore, it has not required the typical initial capital outlay, but the model is risky.

What’s the reason for the IPO?

Landlords of the premises will likely have realised their increased bargaining power in negotiating terms for future leases. This is one of the key reasons why Pembury is looking to raise funds through an IPO – to acquire properties and secure future premises.

Is it a profitable business?

It is still very early days for the PLG schools sector. Currently there are 19 schools in operation with approximately 1900 students. Current fees are roughly in line with government schools and about 20% less than its competitors.

Management’s forecast (as per prospectus) is quite ambitious and therefore reason to exercise some caution. Guidance is for turnover to double each year for the next 4 years. There is a risk that the projections may not materialise and therefore one would have to question the current value of 100c per share. Based on the earnings guidance, 2 year forward PE would be trading around 18 times. This may look attractive compared to the current Curro PE ratio of 113 times and the current Advtech PE of 27 times, although these companies do have an established track record. (Note -currently PLG Schools earnings are negative, therefore I did not use the current PE ratio).

As mentioned, the sector is very attractive and it will be very interesting to see how PLG Schools fares against the competition. The Private Placement offering in PLG Schools would be attractive to investors looking for a play on the sector and have a high tolerance for risk.

*To view the full prospectus, please go to this link: http://www.plgschools.co.za/images/PLGProspectus/PLGProspectus2017.pdf

How to participate:

If you would like to participate in the Private Placement, please do get in touch with the broking team:

Daniel Nel 

daniel@sharenet.co.za

021 700 4800

Cheyne Anderson

cheyne@sharenet.co.za

021 700 4800

*Deadline to submit your application: Thursday 23th of March 2017

** Non-account holders who are interested, please get in touch.

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cheyne

Cheyne Anderson
Portfolio Manager and Securities Trader

Cheyne has spent the last 10 years working in London, holding numerous positions within Equity and Equity Derivatives at various Investment Banks. His main focus has been on South African and Emerging Markets and also gained good exposure to global equity markets and products. He completed both his BCom degree in Economics and his BCom. Honours in Financial Analysis and Portfolio Management at the University of Cape Town. After completing each of the rigorous exams, Cheyne became a CFA Charterholder in 2014.


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