Australia | Sep 26 2022
This story features IDP EDUCATION LIMITED. For more info SHARE ANALYSIS: IEL
IDP Education continues its pursuit of growth, gaining traction in key regions with its newly announced acquisition of Intake Education.
-IDP Education will acquire student placement agency Intake Education
-Acquisition increases IDP Education’s exposure to outbound students in African and Asia, and the inbound UK market
-Analysts largely positive on access to key markets and leverage opportunities offered by purchase
By Danielle Austin
A new acquisition should see IDP Education ((IEL)) further penetrate the UK student placement market. The company is set to acquire Intake Education for $83m having entered into a binding agreement expected to complete in November.
The largest student placement agency in West Africa, Intake Education is focused on UK-bound student placement volumes. The company has operations across Nigeria, Ghana, Kenya, Philippines, Thailand, Taiwan, India and the UK, with its African operations accounting for around 75% of placement volumes and Taiwan 15%.
IDP Education has previously called Nigeria, the third largest source market for placements in the UK, and the Philippines, priority markets. Nigeria in particular has high demand for international study, with close to 66,000 visas granted to Nigerian students to study in the UK in FY22. Across the wider Africa region, students account for 15% of placement volumes in the UK having grown at a 21% compound annual growth rate between 2016 and 2021.
The acquisition of Intake Education will add a further seven student placement offices to IDP Education’s single office in Nigeria.
Analysts expect acquisition to be accretive in FY23 and supportive of growth
Of FNArena’s database brokers both Morgan Stanley and UBS have updated on IDP Education following its acquisition announcement. Both are equivalent Buy rated, with an average target price of $35.25.
Both Morgan Stanley and UBS agree that the purchase should prove complimentary to IDP Education’s existing network, accelerating the company’s entry into the African market and underlying its next major chapter of growth.
Expecting the acquisition to provide exposure to key high growth markets, Morgan Stanley (Overweight, target price $35.00) anticipates Intake Education will contribute $20m to revenues and $10m to earnings, placing around 5,500 students in 2022. This should see the acquisition be 3-4% earnings per share accretive in FY23, on an annualised basis. The broker does highlight that with UK volumes skewed to the first half of the financial year, the purchase should provide greater benefits in its second year. Morgan Stanley continues to find IDP Education better placed than competitors to capture demand, and market share.
UBS (Buy, target price $35.50) sees the acquisition as underpinning IDP’s next major chapter of growth, accelerating the company’s entry in the African market. The broker’s earnings per share estimates increase 1% in FY23 and 2% in the years following.
Outside of core coverage, Goldman Sachs and Jarden have also reported on IDP Education’s purchase. Like the other brokers, Jarden (Overweight, target price $35.03) described the purchase as making strategic sense to the company’s growth ambitions. Jarden assumes a slightly higher annualised revenue contribution than Morgan Stanley of $20-22m. The broker expects IDP to be net cash positive by June.
Goldman Sachs (Buy, target price $36.00) sees opportunity to leverage Intake Education’s network and increase placements into markets where IDP has already developed strong relationships with education providers, such as Australia and Canada. The broker finds a compelling long-term growth opportunity in IDP Education. Key drivers underpinning this include momentum in the US following the company’s recent entry into the market, and reinvestment to retain its digital competitive advantage.
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