The social measures and restrictions of the COVID-19 pandemic are poised to change the landscape of Australia's education sector. As many school kids learn from home and tertiary courses move to predominantly online resources, companies in the education sector will be forced to adapt.
So, here are 2 education shares on the ASX and their outlook moving forward.
G8 Education Ltd (ASX: GEM)
G8 is Australia's largest early childhood education and care provider listed on the ASX. The company operates around 470 centres in Australia and looks after approximately 58,000 children per week.
The childcare sector has come under immense pressure in the COVID-19 pandemic. There have been numerous factors that have contributed to a reduction in occupancy rates, with more parents working from home or just pulling out their children from care centres to cut costs or as a precaution.
According to an industry body, the Australian Childcare Alliance (ACA), there has been anywhere between a 15% and 50% drop in occupancy. Despite lower occupancy rates, child care operators like G8 are forced to cover outgoing costs such as rent and wages. As a result, the industry is forced to seek government assistance in order to minimise the impact.
Earlier this year, G8 provided an outlook on the company's performance in 2020. In its full-year report, G8 highlighted that bushfires and the COVID-19 pandemic have caused significant instability in the sector. The company noted that occupancy was slightly behind the prior year on a like-for-like basis. The challenges faced by G8 and the childcare sector is reflected in the company's share price which has plunged more than 67% since the start of the year.
IDP Education Ltd (ASX: IEL)
IDP is a global leader in international education services, providing international students with language courses so that they can study in English-speaking countries. The company provides university preparation courses that are recognised in Australia, the US, UK and Europe.
Earlier this year, IDP notified the market that coronavirus was not having a material impact on the financial performance of the company. However, as the virus has turned into a pandemic, tertiary providers like IDP are in the firing line.
Earlier today, IDP filed for its shares to be suspended from quotation as the company prepares to release an announcement regarding the impacts of COVID-19 on its business. Warning signs were seen last week when IDP announced that the company would be deferring payment of its interim dividend for 6 months.
Despite the structural growth story, the IDP share price has plummeted more than 53% since its February high.
Should you buy?
In the short-term, travel restrictions and social isolation measures will have a significant impact on the education sector. In the long-term, however, there might be buying opportunities for ASX shares like IDP that service the lucrative tertiary education market, as Australia will still be regarded for its higher education.
Other potential growth stories could be companies like 3P Learning Ltd (ASX:3PL) which offer online learning resources to supplement traditional education.
I think a prudent strategy would be to keep these ASX growth shares on a watchlist and wait for share price consolidation before making an investment decision.
