Shareholders of G8 Education Ltd (ASX: GEM) had to remain patient over the last eight months or so, but those who did are set to reap the rewards in the long run.
In the time between September 2014 and April 2015, shares of Australia's largest for-profit childcare centre operator plunged a whopping 43% from a high of $5.63 to just $3.21 based on concerns of increased government regulation.
However, it has since managed to regain nearly 25% to be trading at $4.00, and that upward trend looks set to continue. In fact, UBS has even slapped a $6.22 12-month price target on the stock, as reported by the Fairfax press, thanks in large part to the government's planned increase in childcare subsidiaries.
When Joe Hockey read out the 2015 Federal Budget on Tuesday evening, he confirmed reports that an additional $3.5 billion would be allocated to childcare in an effort to improve affordability and access to the sector.
In addition, the changes are also designed to encourage new parents to return to the workforce sooner to boost the employment rate. While this could well see an increase in occupancy in G8 Education's childcare centres, it also provides scope for the company to increase its prices.
As it continues on its path to opening new centres, this could prove to be a profitable development for the company. Although G8 Education remains my preferred stock to benefit from the changes, its rivals Affinity Education Group Ltd (ASX: AFJ), Folkestone Education Trust (ASX: FET) and Think Childcare and Education Ltd (ASX: TNK) are also likely to receive a boost.
