Private higher education group Stadio has declared its first dividend with shareholders set for a R40m payout, even as it is still growing its private tertiary offering to one day compete head on with state institution Unisa.
Valued at R2.88bn on the JSE, Stadio aims to create large, multi-faculty campuses and offers 86 accredited courses in fields including law, chartered accounting, film, acting, education and IT. Spun out of private schooling group Curro, it has just over 38,200 students, with 84% of these studying online.
It is paying an inaugural dividend of 4.7c a share as it has spare cash on the balance sheet in part due to delaying building its new large Durbanville campus. It is waiting for new programmes and courses accredited by higher education authorities before building a bigger campus next to its Bellville one.
The group has been waiting for over a year for accreditation of 34 new courses, including some in law and engineering, and only six of these have been granted.
CEO Chris Vorster said it usually took six to eight months to have a course accredited by the higher education authorities, but it is now taking much longer. He said regulations allow the Council of Higher Education to take 18 months to sign off a course with the department of higher education allowed another a year.
The delays, which worsened during the pandemic, restrict Stadio’s growth plans, delaying new courses and the signing up of new students it would gain from them.
In the long term, however, Stadio sees growth and is confident in the quality and price of its educational programmes amid a growing shortage of spaces at the large state universities.
It also bought business CA Connect and now offers an online one year postgraduate diploma in accounting that leads to a qualification as a Chartered Accountant.
Vorster said the group has “established a very nice foundation and believes it has a base to really accelerate growth”. As some universities face increasing numbers of fee protests, it offers “stability”. Stadio is not trying to compete head on with institutions like Wits University and UCT.
“Our focus is purely on being student centric and making sure our qualifications are high in demand in the workplace,” Vorster said.
Growth will be driven by partnering with industry and providing students with qualifications that are in demand by employers, he said.
Stadio has industry advisory boards at each faculty to involve experts in curriculum development and evaluations, and receive feedback on performance of former graduates in the workplace.
Small Talk daily investment analyst Anthony Clark said: “Stadio has established a basket of extremely well-regarded qualifications.”
Parents will spend money on courses that are likely to lead to their children getting a job when they have completed their studies. Demand for Stadio’s courses will increase as people invest in education to keep their jobs or change careers or upskill in order to move overseas, Clark said.
Stadio is set to benefit from demand as government correspondence Unisa cuts or loses accreditation for certain courses. For example, Unisa no longer allows new students to study the popular one-year postgraduate qualification in teaching that allows degree holders to become high school teachers. Private colleges are the only places to offer this popular course part time.
“We see very, very exciting growth in our postgraduate certificate in education (PGCE) teaching programme,” said Vorster. The teaching diploma is offered under its Embury brand.
From an investment point of view Clark said Stadio is his favourite education stock and one he believes will show long-term growth as it is “asset light”.
Clark says Stadio does not need capital raises for infrastructure development and new campuses, unlike the school group, Curro, which had six rights issues to raise the funds needed to buy land and open new schools. This led to a knock in Curro’s share price.
Stadio can offer postgraduate qualifications online and reduce the need for physical developments.
“Professional courses of a high calibre can easily be done online.” said Clark, noting how Stadio’s Milpark Business School has just closed its campus and moved online only.
Group revenue rose 18% to R1.1bn in its year to end-December, with core headline earnings rising 27% to R149m, with Stadio bouncing back from one-off costs related to its accounting business CA Connect in the prior year.
Vorster says post graduates are given shares in Stadio as part of its strategy to drive long-term loyalty by former students. Universities like UCT and Stellenbosch rely on former students, known as alumni, for funding and support.
The share price closed 3.34% higher at R3.40.
Update: March 14 2022
This story has ben updated with additional information.
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