Emerging Childcare stock with upcoming catalyst

Drawing on K2’s eighteen years of investment experience, we determine the best opportunities by using a combination of top-down industry research along with bottom up fundamental analysis. Meeting company management also plays a key role in the investment process as does establishing expectations from the investment community. Identifying a catalyst can come in many forms and over various time frames. However the focus will always be on specific event/s that will drive the market to re-rate the stock. Companies can remain undervalued for long periods, and therefore timing will also play a key part of our investment approach.

Think Childcare Limited as a company is well placed to deliver strong shareholder returns. The company owns, manages and operates 35 premium childcare facilities with a clear focus on centres located within 100km’s of Melbourne CBD. The company recently delivered a strong set of results for the Half Year 2016 of Revenues +19% and Profits +45%.  The key growth drivers come from their successful strategy execution, targeted at improving occupancy and efficiency in its current portfolio, complemented by further acquisitions. With favourable industry dynamics and a proven strategy, management has the opportunity to grow the business substantially.  The company trades on a 1year forward PE-14x and a ~4.5% Fully Franked Dividend Yield. We feel this represents compelling value and the ongoing delivery of earnings growth will prove to be the catalyst for a re-rating.