South Africa

Anthony Clark’s interesting mid-cap stock pick

Anthony Clark, an independent analyst for Small Talk Daily Research, said Curro stands out as an undervalued stock with great upside.

Curro Holdings is a JSE-listed company that offers schooling to learners from early childhood to Grade 12.

This independent group of schools was established in 1998 with 28 learners in the vestry of a church. The founders had a vision of making independent school education accessible to more learners.

The school network showed strong growth, and in 2009 Paladin Capital, a subsidiary of the PSG Group, acquired a 50% stake in Curro for R50 million.

Curro was listed on the Johannesburg Stock Exchange (JSE) AltX on 2 June 2011 and moved to the JSE main board in July 2012.

In 2020, amidst the Covid-19 pandemic and regular lockdowns, the education group launched Curro Online.

It was Curro’s first online school to provide a flexible education model, with classes taught by current Curro teachers.

“We’ve been developing our digital education offering for some time now, which is evident with our recently launched DigiEd model,” said Curro online business manager Jay Paul.

Paul noted that most homeschooling solutions do not prepare the learners for the technology-heavy 21st Century, “and hence we focused our curriculum on maths, science, coding and robotics.”

As of 18 February 2022, Curro boasted 178 schools on 76 campuses with 70,408 learners.

Speaking to Talking with Traders, Clark said Curro’s share price peaked at over R47 per share in 2016 but fell to R4.62 during the Covid pandemic.

“Curro had an extended period of share price underperformance. In the year to date, the counter has fallen 29%, and over three years, it has slumped 54%,” he wrote in the Financial Mail.

The share price was partly a casualty of PSG Group’s decision to delist from the JSE and unbundle its assets.

“They let go of 64% of Curro which has depressed the share price because the big liquidity event has seen portfolios flooded with education shares,” he said.

Clark argued that PSG Group’s unbundling overshadowed the work Curro management has done in rehabilitating and resuscitating the company’s business strategy.

The company is currently trading at around R9.00 per share, which Clark argues offers good value.

Clark has a target price of R16 on Curro, which means it provides a big upside should his analysis hold up.

Curro share price

Curro revenue