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RedHill Education

ASX:RDH
Snowflake Description

High growth potential with adequate balance sheet.

The Snowflake is generated from 30 checks in 5 different areas, read more below.
RDH
ASX
A$61M
Market Cap
  1. Home
  2. AU
  3. Consumer Services
2018/01/19
Company description

RedHill Education Limited engages in the various education businesses in Australia. More info.


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  • RedHill Education's last earnings update was 203 days ago.
  • RedHill Education is covered by less than 3 analysts.
SHARE PRICE
3 Month History
RDH
Industry
5yr Volatility vs Market
Competitors

Sorry, no analysis for RedHill Education's competitors could be found in our database.

Value

 Is RedHill Education undervalued based on future cash flows and its price relative to the stock market?

Value is all about what a company is worth versus what price it is available for. If you went into a grocery store and all the bananas were on sale at half price, they could be considered undervalued.
INTRINSIC VALUE BASED ON FUTURE CASH FLOWS
Here we compare the current share price of RedHill Education to its discounted cash flow analysis.value.

The discounted cash flow value is simply looking at what the company is worth today, based on estimates of how much money it is expected to make in the future.

How is this discounted cash flow calculated?

Current Discount
Amount off the current price RedHill Education is available for.
Intrinsic value
48%
Share price is A$2.01 vs Future cash flow value of A$3.86
Current Discount Checks
For RedHill Education to be considered undervalued it must be available for at least 20% below the current price. Less than 40% is even better.
  • RedHill Education's share price is below the future cash flow value, and at a moderate discount (> 20%).
  • RedHill Education's share price is below the future cash flow value, and at a substantial discount (> 40%).
PRICE RELATIVE TO MARKET
We can also value a company based on what the stock market is willing to pay for it. This is similar to the price of fruit (e.g. Mangoes or Avocados) increasing when they are out of season, or how much your home is worth.

The amount the stock market is willing to pay for RedHill Education's earnings, growth and assets is considered below, and whether this is a fair price.
Price based on past earnings
Are RedHill Education's earnings available for a low price, and how does this compare to other companies in the same industry?
  • RedHill Education is overvalued based on earnings compared to the AU Consumer Services industry average.
  • RedHill Education is overvalued based on earnings compared to the AU market.
Price based on expected Growth
Does RedHill Education's expected growth come at a high price?
  • RedHill Education is good value based on expected growth next year.
Price based on value of assets
What value do investors place on RedHill Education's assets?
  • RedHill Education is overvalued based on assets compared to the AU Consumer Services industry average.
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Value checks
We assess RedHill Education's value by looking at:
  1. Is the discounted cash flow value less than 20%, or 40% of the share price? (2 checks) ( Click here or on bar chart for details of DCF calculation. )
  2. Is the PE ratio less than the market average, and/ or less than the Consumer Services industry average (and greater than 0)? (2 checks)
  3. Is the PEG ratio within a reasonable range (0 to 1)? (1 check)
  4. Is the PB ratio less than the Consumer Services industry average (and greater than 0)? (1 check)
  5. RedHill Education has a total score of 3/6, see the detailed checks below.

    Note: We use GAAP Earnings per Share in all our calculations including PE and PEG Ratio.
    Note 2: PEG ratio is based on analysts EPS growth expectations in 1 year (76.12%).

    Full details on the Value part of the Simply Wall St company analysis model.
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Discounted cash flow (2 Stage Free Cash Flow to Equity)

The calculations below outline how an intrinsic value for RedHill Education is arrived at by discounting future cash flows to their present value. We use analyst's estimates of cash flows going forward 5 years.

See our documentation to learn about this calculation.

5 year cash flow forecast

Present value of next 5 years cash flows:
A$23

Terminal Value

Terminal Value = FCF2022 × (1 + g) ÷ (Discount Rate – g)

Terminal Value = A$8 × (1 + 2.76%) ÷ (8.55% – 2.76%)

Terminal value based on the Perpetuity Method where growth (g) = 2.76%:
A$142

Present value of terminal value:
A$94

Equity Value

Equity Value (Total value) = Present value of next 5 years cash flows + terminal value
A$117 = A$23 + A$94

Value = Total value / Shares Outstanding (A$117 / 30)

Discount to Share Price

Value per share:
A$3.86

Current discount (share price of A$2.01): 47.91%



Estimate of Discount Rate

The discount rate, or required rate of return, is estimated by calculating the Cost of Equity.

Discount rate = Cost of Equity = Risk Free Rate + (Levered Beta * Equity Risk Premium)

Discount rate = 8.55% = 2.76% + (0.8 * 7.24%)



Estimate of Bottom Up Beta

The Levered Beta is the Unlevered Beta adjusted for financial leverage. It is limited to 0.8 to 2.0 (practical range for a stable firm). Note the market value of equity is used not the book value (A$61,084,004).

Levered Beta = Unlevered beta (1 + (1- tax rate) (Debt/Equity))

0.723 = 0.723 (1 + (1- 30%) (0.12%))

Levered Beta used in calculation = 0.8



Assumptions
  1. The risk free rate of 2.76% is from the 10 year government bond rate in AUD.
  2. The bottom-up beta is estimated by analysing other companies in the same industry.
  3. The Equity Risk Premium is calculated by subtracting the risk free rate from the market return premium (7.24%) (source: Buffet).
  4. The dividend discount model is automatically used for companies in the following industries: Banks, Insurance, Real Estate Investment Trusts (REITs), Diversified Financial Services and Capital Markets.

Future Performance

 How is RedHill Education expected to perform in the next 1 to 3 years based on estimates from 1 analyst?

  • RedHill Education is covered by less than 3 analysts.
The future performance of a company is measured in the same way as past performance, by looking at estimated growth and how much profit it is expected to make.

Future estimates come from professional analysts. Just like forecasting the weather, they don’t always get it right!
Annual Growth Rate
52.8%
Expected annual growth in earnings.
Earnings growth vs Low Risk Savings
Is RedHill Education expected to grow at an attractive rate?
  • RedHill Education's earnings growth is expected to exceed the low risk savings rate of 4.6%.
Growth vs Market Checks
  • RedHill Education's earnings growth is expected to exceed the AU market average.
  • RedHill Education's revenue growth is expected to exceed the AU market average.
Annual Growth Rates Comparison
Analysts growth expectations
Super high growth metrics
High Growth Checks
  • RedHill Education's earnings are expected to grow significantly at over 20% yearly.
  • RedHill Education's revenue is expected to grow by 19.9% yearly, however this is not considered high growth (20% yearly).
Past and Future Earnings per Share
The accuracy of the analysts who estimate the future performance data can be gauged below. We look back 3 years and see if they were any good at predicting what actually occurred. We also show the highest and lowest estimates looking forward to see if there is a wide range.
Performance in 3 years
In the same way as past performance we look at the future estimated return (profit) compared to the available funds. We do this looking forward 3 years.
  • RedHill Education is expected to perform strongly, Return on Equity (ROE) in 3 years is estimated to be above 20%.

Improvement & Relative to industry
  • Performance (ROE) is expected to be above the current AU Consumer Services industry average.
  • An improvement in RedHill Education's performance (ROE) is expected over the next 3 years.
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Future performance checks
We assess RedHill Education's future performance by looking at:
  1. Is the annual earnings growth rate expected to beat the low risk savings rate, plus a premium to keep pace with inflation?
  2. Is the annual earnings growth rate expected to beat the average growth rate in earnings of the AU market? (1 check)
  3. Is the annual revenue growth rate expected to beat the average growth rate in revenue of the AU market? (1 check)
  4. Is the annual earnings growth rate expected to be above 20%? (1 check)
  5. Is the annual revenue growth rate expected to be above 20%? (1 check)
  6. Is the Return on Equity in 3 years expected to be over 20%? (1 check)
Some of the above checks will fail if the company is expected to be loss making in the relevant year.
RedHill Education has a total score of 5/6, see the detailed checks below.

Note 1: We use GAAP Net Income Excluding Exceptional Items for our Earnings in all our calculations.

Full details on the Future part of the Simply Wall St company analysis model.

Past Performance

  How has RedHill Education performed over the past 5 years?

  • RedHill Education's last earnings update was 203 days ago.
The past performance of a company can be measured by how much growth it has experienced and how much profit it makes relative to the funds and assets it has available.
Past earnings growth
Below we compare RedHill Education's growth in the last year to its industry (Consumer Services).
Past Earnings growth analysis
We also check if the company has grown in the past 5 years, and whether it has maintained that growth in the year.
  • RedHill Education's year on year earnings growth rate has been positive on average over the past 5 years.
  • RedHill Education's 1 year earnings growth exceeds its 5 year annual average (426.4% vs 40.9%)
  • RedHill Education's earnings growth has exceeded the AU Consumer Services industry average in the past year (426.4% vs 17.1%).
Earnings and Revenue History
RedHill Education's revenue and profit over the past 5 years is shown below, any years where they have experienced a loss will show up in red.
Performance last year
We want to ensure a company is making the most of what it has available. This is done by comparing the return (profit) to a company's available funds, assets and capital.
  • Poor return on shareholders funds (ROE < 20%) last year.
  • RedHill Education performed worse than the AU Consumer Services industry average based on Return on Assets (ROA) last year.
  • Performance based on Return on Capital Employed (ROCE) has been diminishing over 3 years.
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Past performance checks
We assess RedHill Education's performance over the past 5 years by checking for:
  1. Has earnings increased in past 5 years? (1 check)
  2. Has the earnings growth in the last year exceeded that of the Consumer Services industry? (1 check)
  3. Is the recent earnings growth over the last year higher than the average annual growth over the past 5 years? (1 check)
  4. Is the Return on Equity (ROE) higher than 20%? (1 check)
  5. Is the Return on Assets (ROA) above industry average? (1 check)
  6. Has the Return on Capital Employed (ROCE) increased from 3 years ago? (1 check)
The above checks will fail if the company has reported a loss in the most recent earnings report. Some checks require at least 3 or 5 years worth of data.
RedHill Education has a total score of 3/6, see the detailed checks below.

Note: We use GAAP Net Income excluding extraordinary items in all our calculations.

Full details on the Past part of the Simply Wall St company analysis model.

Health

 How is RedHill Education's financial health and their level of debt?

A company's financial position is much like your own financial position, it includes everything you own (assets) and owe (liabilities).

The boxes below represent the relative size of what makes up RedHill Education's finances.

The net worth of a company is the difference between its assets and liabilities.
Net Worth
  • RedHill Education's short term (1 year) commitments are greater than its holdings of cash and other short term assets.
  • RedHill Education's cash and other short term assets cover its long term commitments.
Balance sheet
This treemap shows a more detailed breakdown of RedHill Education's finances. If any of them are yellow this indicates they may be out of proportion and red means they relate to one of the checks below.
Assets
Liabilities and shares
The 'shares' portion represents any funds contributed by the owners (shareholders) and any profits.
  • Low level of unsold assets.
  • Total debt is covered by total short term assets, assets are 253.7x debt.
Historical Debt
Nearly all companies have debt. Debt in itself isn’t bad, however if the debt is too high, or the company can’t afford to pay the interest on its debts this may have impacts in the future.

The graphic below shows equity (available funds) and debt, we ideally want to see the red area (debt) decreasing.

If there is any debt we look at the companies capability to repay it, and whether the level has increased over the past 5 years.
  • RedHill Education's level of debt (0.5% of total debt) compared to net worth is satisfactory (less than 40%).
  • The level of debt compared to net worth has increased over the past 5 years (0% vs 0.5% today).
  • Total debt is well covered by annual operating cash flow (7048.6%, greater than 20% of total debt).
  • Interest on debt is well covered by earnings (EBIT is 926x coverage).
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Financial health checks
We assess RedHill Education's financial health by checking for:
  1. Are short term assets greater than short term liabilities? (1 check)
  2. Are short term assets greater than long term liabilities? (1 check)
  3. Has the debt to equity ratio increased in the past 5 years? (1 check)
  4. Is the debt to equity ratio over 40%? (1 check)
  5. Is the debt covered by short term assets? (1 check)
  6. Are earnings greater than 5x the interest on debt (if company pays interest at all)? (1 check)
  7. RedHill Education has a total score of 4/6, see the detailed checks below.


Full details on the Health part of the Simply Wall St company analysis model.

Dividends

 What is RedHill Education's current dividend yield, its reliability and sustainability?

Dividends are regular cash payments to you from the company, similar to a bank paying you interest on a savings account.
Annual Dividend Income
Dividend payments
1%
Current annual income from RedHill Education dividends. Estimated to be 2.11% next year.
If you bought A$2,000 of RedHill Education shares you are expected to receive A$20 in your first year as a dividend.
Dividend Amount
Here we look how much dividend is being paid, if any. Is it above what you can get in a savings account? It is up there with the best dividend paying companies?
  • Paying below low risk savings rate (3%).
  • Paying below markets top dividend payers (4.92%).
Annualized Historical and Future Dividends
It is important to see if the dividend for a company is stable, and not wildly increasing/decreasing each year. This graph shows you the historical rate to count toward your assessment of the stock.

We also check to see if the dividend has increased in the past 10 years.
  • It is too early to tell whether RedHill Education has stable dividend payments.
  • RedHill Education only just started paying a dividend, it is too early to tell if payments are increasing.
Current Payout to shareholders
What portion of RedHill Education's earnings are paid to the shareholders as a dividend.
  • Dividends paid are well covered by net profit (2.9x coverage).
Future Payout to shareholders
  • Dividends after 3 years are expected to be well covered by net profit (3.2x coverage).
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Income/ dividend checks
We assess RedHill Education's dividend by checking for:
  1. Firstly is the company paying a notable dividend (greater than 0.5%) - if not then the rest of the checks are ignored.
  2. Current dividend yield, is there one at all, is it higher than the low risk savings rate, and is it above the top 25% of dividend payers? (2 checks)
  3. Have they paid a dividend for 10 years, and during this period has the dividend been volatile (drop of more than 25%)? (1 check)
  4. If they have paid a dividend for 10 years has it increased in this time? (1 check)
  5. How sustainable is the dividend, can RedHill Education afford to pay it from its earnings today and in 3 years (Payout ratio less than 90%)? (2 checks)
  6. RedHill Education has a total score of 2/6, see the detailed checks below.


Full details on the Dividends part of the Simply Wall St company analysis model.

Management

 What is the CEO of RedHill Education's salary, the management and board of directors tenure and is there insider trading?

Management is one of the most important areas of a company. We look at unreasonable CEO compensation, how long the team and board of directors have been around for and insider trading.
CEO
Glenn Elith, image provided by Google.
Glenn Elith
COMPENSATION A$494,616
TENURE AS CEO 5.7 years
CEO Bio

Mr. Glenn Elith, B Bus (UTS), CA has been the Chief Executive Officer, Managing Director and Executive Director of Redhill Education Limited since May 11, 2012 and also as its Chief Financial Officer since January 9, 2012. Mr. Elith served as a Company Secretary of Redhill Education Limited from July 25, 2017 to September 21, 2017. He served as an Acting Chief Executive Officer of Redhill Education Limited from March 2012 to May 11, 2012 and also served as its Company Secretary from January 9, 2012 to July 2012. He has worked at large organisations including Lion Nathan (now, Lion Pty Ltd) and George Weston Foods and at high-growth entrepreneurial businesses including specialty retailer Macro Wholefoods Market (now, owned by Woolworths Limited). He have broad finance experience in a number of industries including start-ups. He is a Chartered Accountant. He holds B.Bus from UTS.

CEO Compensation
  • Glenn's compensation has been consistent with company performance over the past year.
  • Glenn's compensation appears reasonable.
Management Team Tenure

Average tenure of the RedHill Education management team in years:

2.8
Average Tenure
  • The tenure for the RedHill Education management team is about average.
Management Team

Glenn Elith

TITLE
CEO, MD
COMPENSATION
A$495K
TENURE
5.7 yrs

Gabriel Providel

TITLE
General Manager of Technology & Design Division
TENURE
2.3 yrs

Simon Costain

TITLE
General Manager of Sales & Marketing
TENURE
4.3 yrs

Orla Bennet

TITLE
Group Finance Controller
TENURE
2 yrs

Lisa Jones

TITLE
Company Secretary
TENURE
0.3 yrs

Raman Nambiar

TITLE
General Manager of Coder Factory Academy
TENURE
2 yrs

Mark Ashbridge

TITLE
General Manager of the Left Bank
TENURE
4.2 yrs

Shin Shimizu

TITLE
General Manager of Victorian Operations
TENURE
2.6 yrs

Gizelle Rezende

TITLE
General Manager of Greenwich English College and Greenwich Management College
TENURE
1.7 yrs
Board of Directors Tenure

Average tenure of the RedHill Education board of directors in years:

7.8
Average Tenure
  • The tenure for the RedHill Education board of directors is about average.
Board of Directors

Bill Beerworth

TITLE
Non-Executive Chairman
COMPENSATION
A$125K
AGE
71

Glenn Elith

TITLE
CEO, MD
COMPENSATION
A$495K
TENURE
5.7 yrs

Chris Clark

TITLE
Independent Non-Executive Director
COMPENSATION
A$65K
TENURE
6.2 yrs

Will Deane

TITLE
Independent Non-Executive Director
COMPENSATION
A$85K
TENURE
11.5 yrs
Recent Insider Trading
  • RedHill Education insiders have only sold shares in the past 3 months.
Who owns this company?
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Management checks
We assess RedHill Education's management by checking for:
  1. Is the CEO's compensation unreasonable compared to market cap and profit (greater than 0.5% of the company's profit + 0.03% of market cap)? (1 check)
  2. Has the CEO's compensation increased more than 20% whilst the EPS is down more then 20%? (1 check)
  3. Is the average tenure of the management team less than 2 years? (1 check)
  4. Is the average tenure of the board of directors team less than 3 years? (1 check)
  5. RedHill Education has a total score of 0/6, this is not included on the snowflake, see the detailed checks below.


Note: We use the top 6 management executives and board members in our calculations.

Note 2: Insider trading include any internal stakeholders and these transactions .

Full details on the Management part of the Simply Wall St company analysis model.

Company News

External News
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Simply Wall St News

What Should Investors Know About RedHill Education Limited's (ASX:RDH) Profit Margin?

To get a preliminary understanding, this article will interpret RedHill Education's margin performance to help recognise the underlying make-up of revenue and expenses that is responsible for driving future earnings expectations and what it means for RDH's returns relative to its competitors. … Margin Calculation for RDH Profit Margin = Net Income ÷ Revenue ∴ Profit Margin = 1.74 Million ÷ 41.47 Million = 4.19% There has been an expansion in RedHill Education's margin over the past five years, as a result of 40.90% in average net income growth exceeding average revenue growth of 17.86%, which means that the previous increase in revenue has coincided with a larger portion falling to the bottom line. … What does RedHill Education's margin expectation tell us about future earnings?

Simply Wall St -

Why RedHill Education Limited (ASX:RDH) Could Be A Buy

RedHill Education Limited (ASX:RDH), a diversified consumer services company based in Australia, led the ASX gainers with a relatively large price hike in the past couple of weeks. … With profit expected to more than double over the next couple of years, the future seems bright for RedHill Education. … Its prosperous future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy RedHill Education.

Simply Wall St -

Why RedHill Education Limited's (ASX:RDH) Ownership Structure Is Important

Check out our latest analysis for RedHill Education ASX:RDH Ownership Summary Nov 13th 17 Institutional Ownership RDH's 21.97% institutional ownership seems enough to cause large share price movements in the case of significant share sell-off or acquisitions by institutions, particularly when there is a low level of public shares available on the market to trade. … This level of ownership gives retail investors the power to sway key policy decisions such as board composition, executive compensation, and potential acquisitions. … Private Company Ownership Potential investors in RDH should also look at another important group of investors: private companies, with a stake of 13.87%, who are primarily invested because of strategic and capital gain interests.

Simply Wall St -

With An ROE Of 12.78%, Has RedHill Education Limited's (ASX:RDH) Management Done A Good Job?

Return on Equity = Net Profit ÷ Shareholders Equity ROE is measured against cost of equity in order to determine the efficiency of RDH’s equity capital deployed. … ROE can be dissected into three distinct ratios: net profit margin, asset turnover, and financial leverage. … This is called the Dupont Formula: Dupont Formula ROE = profit margin × asset turnover × financial leverage ROE = (annual net profit ÷ sales) × (sales ÷ assets) × (assets ÷ shareholders’ equity) ROE = annual net profit ÷ shareholders’ equity ASX:RDH Last Perf Oct 29th 17 Essentially, profit margin shows how much money the company makes after paying for all its expenses.

Simply Wall St -

Company Info

Map
Description

RedHill Education Limited engages in the various education businesses in Australia. The company operates in three segments: Technology & Design, English Language, and Student Agency. The Technology & Design segment operates the Academy of Information Technology, which provides face-to-face and online courses in information technology, digital design, interactive multimedia, and games and apps programming, as well as operates International School of Colour and Design that provides face-to-face and online learning in interior design and styling courses. The English Language segment operates Greenwich English College, which provides English language intensive courses, as well as vocational education and training programs for overseas students. The Student Agency segment operates the Go Study Australia, an international student recruitment agency that offers student recruitment services. RedHill Education Limited was founded in 2006 and is headquartered in Ultimo, Australia.

Details
Name: RedHill Education Limited
RDH
Exchange: ASX
Founded: 2006
A$61,084,004
30,390,052
Website: http://www.redhilleducation.com
Address: RedHill Education Limited
7 Kelly Street,
Level 2,
Ultimo,
New South Wales, 2007,
Australia
Listings
Exchange Symbol Ticker Symbol Security Exchange Country Currency Listed on
ASX RDH Ordinary Shares Australian Securities Exchange AU AUD 21. Sep 2010
CHIA RDH Ordinary Shares Chi-X Australia AU AUD 21. Sep 2010
Number of employees
Current staff
Staff numbers
144
RedHill Education employees.
Industry
Education Services
Consumer Services
Company Analysis and Financial Data Status
Area Date
Company Analysis updated: 2018/01/19
Last estimates confirmation: 2017/08/30
Last earnings update: 2017/06/30
Last annual earnings update: 2017/06/30


All dates in UTC. All financial data provided by Standard & Poor’s Capital IQ.

Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.