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Intueri Education Group Ltd share price soars 38%

Intueri Education Group Ltd (ASX: IQE) saw its share price rocket up 38% today to 45 cents after the New Zealand-based vocational education provider gave an upbeat update to the market.

Here’s what the company said,

“The tightening regulatory environment in Australia has resulted in a number of sanctions against vocational education providers in recent weeks, culminating in a high-profile listed Australian vocational education provider announcing it had been placed into voluntary administration.”

The company in question was Vocation Ltd (ASX: VET). Another vocational education provider, Australian Careers Network Ltd (ASX: ACO) shares are also suspended while the Australian Competition and Consumer Commission (ACCC) and the Commonwealth Department of Education and Training have commenced legal action against two of the company’s subsidiaries.

Intueri has been tarred with the same brush, after reporting last week that the Tertiary Education Commission (TEC) was undertaking reviews of two of Intueri’s schools, which could see earnings negatively impacted by between $4 and $5 million. Investors took a big stick to the share price following that announcement, beating it down more than 13% on the day, and the share price continued to fall through the week.

Intueri went on,

“The Intueri Board believes these events have impacted on overall investor confidence in the wider [vocational education] sector, however it is important to note that Intueri’s business model is significantly different from those under review in Australia.”

The company says it continues to generate revenue growth, strong earnings margins, and solid cash flow. Intueri also says earnings margins are expected to remain above 20%, generating a solid and stable cash flow.

Investors were obviously heartened by the news, sending shares soaring.

Foolish takeaway

While Intueri says that its business model is significantly different from those under review in Australia, the company doesn’t say how it differs.

The problem for the education provider is that a sector-wide clamp down on fees paid by the government to vocational education providers is highly likely. That could have industry-wide effects beyond just those with significant government funding, and bad news for Intueri and its shareholders.

 

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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