G8 Education Ltd’s (ASX: GEM) presentation at the Macquarie Conference highlighted that the government’s new funding package of childcare will positively impact 2H18 earnings. Vacancies are also down so far in 2018.
According to the Department of Education and Training, the changes to the childcare funding package from July 2018 will cut childcare costs, especially decreasing out-of-pocket expenses for families’ earning less than $120,00 per annum.
Lower childcare costs support increased female participation in the workforce, which in turn will lead to higher childcare demand.
G8 Education is the largest for-profit provider of childcare and early educatior in Australia, but the market remains fragmented with the top five players holding only 25% of the childcare market.
The one-year performance of the share price is -37% with a rally of 7% at the time of writing to $2.75. G8 Education is trading on a forward price-earnings-ratio of 11.2x and the current annual dividend yield is 10% when grossed up for franking.
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