The Australian share market may be dropping again, but the same cannot be said for Nexted Group Ltd (ASX: NXD) shares
In morning trade, the ASX small cap stock is rocketing 43% to 16.5 cents.
Why is this ASX small cap stock rocketing?
Investors have been bidding the tertiary education services provider's shares higher today after it announced a major agreement.
According to the release, the ASX small cap stock has signed an agreement with IH Sydney Training Services and its administrators.
This will see it provide an exclusive right to re-enrol approximately 1,800 English language and vocational students, and to acquire relevant course materials from IH, in Sydney, Melbourne, Adelaide and the Gold Coast.
The company stresses that it is not acquiring a legal entity or a business. No leases or premises are being acquired, nor will any employees be automatically transferring to NextEd.
Rather, students that elect to re-enrol will transition to existing NextEd campuses improving campus utilisation rates, and cashflow.
At present, the small cap ASX stock estimates that approximately 950 English language students and 850 vocational students will re-enrol from IH Sydney Training Services to NextEd. This represents an approximate increase of 30% of English language students and 25% of Vocational students.
Re-enrolment activities, including providing new student agreements and enrolling students into NextEd courses, will take place over the next two weeks with students continuing their studies with the company in the new year.
What are the terms?
The release notes that NextEd will pay $0.7 million to acquire the exclusive rights and course materials. The transaction will be funded from existing cash reserves and completion is scheduled for 20 December.
It is expected to be earnings accretive from the second half of FY 2025 with incremental revenues in the range of $6 million to $7 million for the period. This is based on the expected student re-enrolments, student payments already made, and study durations.
NextEd has agreed to honour any prior student payments made to IH so as not to disadvantage any student re-enrolling.
The ASX small cap stock's CEO, Mark Kehoe, was delighted with the deal. He said:
This is a great outcome for students and for NextEd. We are delighted to be able to assist IH's students to complete their education with us. NextEd's position as one of Australia's largest providers of English Language and Vocational Training means we are uniquely equipped to step in and deliver continuity for students during challenging circumstances. Our ability to act swiftly during market disruptions highlights our capacity and commitment to supporting students and maintaining high education standards.
