EduFocal attractive based on 2022 earnings

EduFocal Limited is offering 129,689,219 ordinary shares to the public at $1 each with the issue opening on March 3, 2022, with the closing scheduled for March 17, but is expected to close earlier.
Only 80,499,272 Ordinary Shares will be available to the general public as 49,189,947 are reserved for Key Strategic Partners and a Lender who agreed to convert a loan into equity.
The Company intends to apply to the Jamaica Stock Exchange for admission of the shares on the Junior Market and will bring the total listings on that market to 45 if the issue is successful.
The company experienced rapid growth with revenues of $27 million in 2019 rising to $103 million in 2020 and profit before tax of $15.6 million. For the period to September 2021 revenues rose 39 percent to $107.6 million with a loss of less than a million dollars, from $77.5 million in revenues and a small profit of $7.5 million before tax. Preliminary results to December 2021 saw revenues rising to $168.6 million with a profit of $15 million or 2.8 cents per share, putting the PE ratio around 36 times 2021 earnings.
The company is projecting revenues rising to $322 million in 2022 and $355 million in 2023, with profits of $50 million and $69 million respectively. The projected revenues for 2022 would equate to growth of 91 percent, well above the December quarter revenues annualized of around $240 million. The forecasted profit appears reasonable if the performance in the December quarter carries over for the rest of 2022 and would represent earnings per share of 8 cents with a PE of 12.
The company had shareholders’ equity of $71 million, with borrowings of $114 million. Current assets stood at $138 million and includes cash of $17 million and a high degree of receivables of $114 million. Payables amount to $24 million at the same time.
The Company commenced operations in March 2012 and has two divisions, Learn and Business. Under the Learn division, the Company provides educational technology in the Business to Consumer space and more recently via the Business division, it offers Business to Business solutions.
EduFocal Learn encompasses the Company’s core business offering which is focused on providing a social learning platform that combines study with play, with the primary offering, focused on test preparation for Jamaica’s Primary Exit Profile exams, previously known as the Grade Six Achievement Test (GSAT). In September 2020, the Company launched the EduFocal Academy product which entailed a full-day learning programme.
The Company’s content is delivered over its proprietary e-learning platform, for which it charges monthly subscription fees. EduFocal Business division was launched in 2020. It is focused on delivering organisation or industry specific e-learning content using the Company’s platform architecture and know-how.
The proceeds of the offer will be used to pay transaction costs of $12 million, $42 million will be used towards the repayment of short term debt and approximately $62 will be used towards expansion in new markets.
The company is involved in online education, relatively new business activity as such the risk associated with an investment in these shares may be higher than for longer established businesses in tried and proven segments of the economy.
The directors are Peter Levy, chairman, Shauna Fuller Clarke, Lloyd Swaby Gordon Swaby, Grace Lindo and Kevin Donaldson

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