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LOY



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By stocklad

Posted: Thursday Jan 30 9:50:50AM 2014

LOY's stock price was stationary around the bought deal financing price until it closed.  After closing, the company announced its latest $5.5M acquisition today, using a portion of the funds raised.  The p/e of the acq is 4.74 which is outstanding.  Also, given this company's track record, we should expect synergies, increased enrollment, cross selling opportunities and housing revenue.  The acq should add about $.005 per share in earnings immediately.  With previous aquisitions yet to be fully in the financials, this acq and one or two more likely to come soon, plus the recently announced housing and franchising initiatives, 2014 eps should be somewhere in the $.08 - $.10 range.

 

As I've mentioned before, this company in no way should get a 10 p/e.  I'm using 15 for valuation purposes but, with LOY's growth rate, something higher might be appropriate.  Regardless, at a current stock price of $.71, the shares are cheap.  We could see some analyst upgrades (from $1.30 ish) in the near future.

 

 


By stocklad

Posted: Friday Dec 6 8:50:44AM 2013

Today's news release.  It looks like the price is responding once more to the great earnings and potential.

-----------------------------------------------------------------------------------------------------------------------

 

Loyalist Group begins student housing pilot program

2013-12-06 08:32 ET - News Release

 

Mr. Andrew Ryu reports

LOYALIST ENTERS STUDENT HOUSING MARKET

Loyalist Group Ltd. has commenced a fully operational pilot program offering housing to its students. The company has leased properties in Toronto, Vancouver, Victoria and Halifax capable of housing 104 students. The properties are 100 per cent presold for the first six months of 2014. The financial returns to Loyalist are extremely compelling. More importantly, the company believes offering students a full complement of services will further enhance its reputation as Canada's leading English-as-a-second-language (ESL) educator.

Loyalist chief executive officer, Andrew Ryu, commented: "We are listening to our students, many of whom worry about accommodation prior to arrival in Canada. We would rather our students concentrate on their studies so we are offering safe and secure housing that meets Loyalist's best in class. Our shareholders will also be rewarded by this initiative, which has been contemplated for some time."

Mr. Ryu continued, "If the pilot project is successful, which we fully expect, Loyalist will continue adding properties to ensure the needs of its students are met."

We seek Safe Harbor.

© 2013 Canjex Publishing Ltd. All rights reserved.


By stocklad

Posted: Thursday Dec 5 10:39:47AM 2013

A poster on Stockhouse posteded a seekingalpha instablog article which gives a very nice summary of the investment thesis for LOY.  Hopefully, one of these links will work for you:

 

http://www.stockhouse.com/companies/bullboard/v.loy/loyalist-group-limited?postid=21974007

or

http://seekingalpha.com/instablog/19040961-e-vestorsgroup/2447311-loyalist-group-limited-an-undervalued-profitable-small-cap-canadian-education-play

 

I've never heard of the group that did the instablog, but they seem to have done a good job.


By stocklad

Posted: Wednesday Dec 4 8:54:05AM 2013

Loyalist Group is an educational organization that is in the business of providing a multitude of
educational services with an emphasis on teaching English as a Second Language, Professional Development and College Transfer Programs.  Loyalist owns schools in Toronto, Vancouver and Halifax.  It provides academic instruction in-class, online and through correspondence, primarily to students for whom English is not a first language.  Programs are offered in a series of steps from basic to advanced which include internship (co-op) opportunities and private counselling for greater and more focused improvement.

 

The company has many overseas linkages and is the dominant player in its niche in Canada.  It made four acquisitions in 2011, two in 2012 and four in 2013.  Their latest acquisition dwarfs anything made to date and only a part month of that acquisition is in the latest financials.  The immediately prior acquisition is almost all in the financials.

 

I've looked at this company a few times this year, but didn't bite because dilution from numerous share issuances was keeping per share earnings from moving upward.  I'm
generally wary of industry consolidators for this reason and tend to stay away from them, but the latest earnings release has changed my opinion of this company.

 

Up to and including Q2 of this year, quarterly revenue had been trending upward from about $3M to about $5M and quarterly pre-tax net income (excluding one-time costs) had been rising from about $500k to about $1M.  That sounds pretty good, but dilution from those share issuances negated all that growth, which meant that eps was basically going nowhere.

 

That all changed in the Q3 financials.  In Q3, there was a big revenue jump, gross margin improvement and much improved per share earnings.  Year over year quarterly revenue
was up 169%, gross margin reached 47% (up from 40%) and pre-tax net income (excluding one-time costs) reached $2.3M, which in per share terms was an increase of 93%.

 

In other words, you can start to see that the whole is becoming much greater than the sum of the parts.  

 

In terms of the future, one must consider potential increases from full inclusion of the latest and
largest acquisition (as I mentioned, there wasn't much of this in Q3), clearing of the student visa bottleneck (the result of a public service strike), more aquisition synergies, cross-selling
opportunies, general organic growth and operating expense savings from the completion of an internal systems development project.  All of that can be had without further dilution, although I do expect to see more of that as the company does even more acquisitions.  If those acquisitions can create the same sort of per share earnings growth that we've just seen, then I'm ok with it.

 

If I assume full taxability, I get current underlying earnings per share at somewhere north of 4 cents.  (I'm not including full results from latest and largest acquisition here because I don't know how much they will be.)  Education companies generally trade at pretty high multiples (perhaps in the 15-20 range), so the current price of $.55 seems cheap to me, especially given the company's potential and the fact that my 4+ cents eps figure is probably quite low.

 

A few more points:

 

- Up until recently the company was debt free.  They just taken on a small amount

  of convertible debt.

- The company has been cash flow negative until now, mostly due to the acquisitions.

   They say they will be cash flow positive going forward.  I can't verify that.

- Insiders own about 17% of the shares.

- I am not aware of any outstanding legal actions against the company.

 

Although I don't put a lot of faith in research reports, here is one if you're interested:

http://www.loyalistgroup.com/images/PDF/LOY-Loyalist-Group-Limited-Reports-Q3-14-November-29-2013-JSI.pdf

They seem to think that 2014 eps will be 8 cents and their target price is $1.25

 

As usual, please do your own due diligence.


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