The move follows Embark emerging as a substantial holder of Mayfield shares in late October, when it informed the ASX that it had acquired a 19.9% stake in Mayfield – the highest level of shares it could own before having to launch a full bid.

Mayfield said at the time that it "welcomes Embark's investment as a positive recognition of the company's performance potential''.

Strength via consolidation

Embark said in a statement to the ASX on Friday that it intended to launch an off-market takeover bid for the shares in Mayfield it did not own at a price of 50 cents per share, valuing the company at $37.7 million.

Mayfield shares closed at 46.5 cents on Thursday. Embark said bringing the two companies together made strategic sense.

The company said in its statement on Friday:

The successful completion of this offer will lead to a larger company (39 centres to 84 centres) with more resources to satisfy the prime aims of both Mayfield and Embark – improved educational and care outcomes for the children within our care whilst ensuring financial robustness.

Embark said further information would be provided in a bidder's statement, which would be prepared by late November.

For the bid to succeed, Embark will need to gain control over at least 90% of Mayfield shares.

An analysis of the Mayfield share register shows that, including the shares owned by Embark, the top 20 shareholders own 88.05% of the company.

Embark will therefore need to win over major shareholders, such as the owner of the second-largest tranche of shares, the Riversdale Road Group, which owns a 13.3% stake, and a number of entities, including Citicorp Nominees with an 8.2% stake and Finexia Wealth with a 6.7% stake.

In recent days, UBS Wealth also emerged as a significant shareholder with a 10.5% stake.

Performing well

Mayfield recently issued a quarterly update to the ASX, indicating that revenue had increased from $22.5 million to $23.7 million quarter on quarter, while its margin increased from 10% to 11% due to cost controls.

Embark, in its half-yearly results announced in August, stated that revenue from ordinary activities increased by 43.5% to $49.4 million, while net profit rose 62.2% to $4 million.

The company also announced a fully-franked dividend of 1.5 cents per share. Embark was valued at $120.2 million at the close of trading on Thursday, with its shares changing hands for $0.65.

The post Takeover bid launched for childcare operator appeared first on The Motley Fool Australia.

G8 Education is Australia's largest childcare centre operator, with over 400 early learning, kindergarten, and preschool centres across Australia under various brands.

Recently, retail investors have embraced a 'buy in the dip' mentality. In other words, they have taken advantage of share market volatility to buy shares at lower prices. 

This was most evident back in April, when a record number of retail investors bought ASX stocks during the 'Liberation Day' dip. So far, this strategy appears to have paid off with the S&P/ASX 200 Index (ASX: XJO) rebounding more than 15% since then. 

Does broker Macquarie Group Ltd (ASX: MQG) think this is a good strategy in the case of G8 Education shares? 

Let's see.

Macquarie downgrades G8 Education

In a 2 July research note, Macquarie downgraded G8 Education shares from outperform to neutral. 

The broker also cut its 12-month price target by 25% from $1.53 to $1.15. Given that shares are currently changing hands for $1.02, this suggests 13% capital appreciation over the next 12 months. 

G8 Education also offers a dividend yield of 5.38%, boosting investors' total return. 

When issuing this downgrade, the broker said:

We are positive on GEM's CY26 outlook, but cautious on CY25 given 1) sluggish occupancy trends, and 2) the Creative Garden Point Cook incident. The incident will likely be an overhang on GEM until visibility improves concerning investigation outcomes and potential impacts.

Macquarie reduced its CY25E occupancy forecast to 65.0% (from 65.7%), citing reduced growth expectations. Looking further out, the broker cut its forecast for CY26/27E occupancy to 70.5%/71.0% (down from 71.4%/71.9%). The broker said it still expects the abolishment of the activity test on 1 January 2026 to be a material tailwind for CY26 occupancy. 

Macquarie also referenced the Creative Garden Point Cook incident when issuing its ratings change. 

This week, it was reported that a man had been arrested and charged with offences relating to children placed at the Creative Garden Point Cook childcare centre. The man in question had been employed by G8 Education between October 2021 and February 2024. 

According to Macquarie, "There is high uncertainty concerning the quantum of potential reputational or financial impacts the incident could create."

Other risks cited by the broker included softer macro driving weaker occupancy trends, mandated wage increases with little to no government subsidisation, cost inflation exceeding above their forecasts, and inability to exit underperforming centres.

What could investors buy instead?

Those interested in the childcare sector and concerned about G8 Education may wish to consider Embark Early Education Ltd (ASX: EVO). 

Its current CEO is Chris Scott, who founded G8 Education. 

The company initially listed in New Zealand, where it operated the majority of its centres. After failing to bounce back from the pandemic in 2022, it sold its NZ centres (around 100), re-domiciled to Australia, and listed on the ASX. This was done via a "scheme of arrangement", meaning no initial public offering (IPO) road show. 

For this reason, as well as its market capitalisation of $128 million, it has largely flown under investors' radar. 

Over the past couple of years, it has been ramping up acquisitions throughout Australia. In May, the company announced it had acquired 2 new centres, bringing its total number of childcare centres to 40. 

It also offers a dividend yield of 8.57%, which is likely to be very attractive to passive income-oriented investors. 

Embark Early Education could be an attractive alternative to G8 Education shares.

The post Why did Macquarie just re-rate G8 Education shares? appeared first on The Motley Fool Australia.

But there are few other areas that have more stable demand and are important to the economy than the development of human capital.

Helpfully, in a video last week some Wilson Asset Management analysts named three ASX shares to buy in the education and human resources industry:

Could there be buybacks for shareholders of this business?

For Wilson senior equity analyst Shaun Weick, childcare provider Evolve Education Group Ltd (ASX: EVO) makes a compelling investment case right now.

"Evolve's a standout buy for us," he said.

"They've just divested their New Zealand assets for $50 million. You're essentially left with an Australian trading business which is performing well."

Weick pointed out that the Evolve shares are currently trading around 2 to 2.5 times enterprise value to earnings, compared to more than five for its peers.

"The balance sheet, therefore, provides immediate flexibility around capital returns. We think buybacks are possible — and acquisitions over time," he said.

"That's a strong buy for us."

Analyst coverage is sparse for Evolve Education. According to CMC Markets, at least Canaccord Genuity agrees with Weick, rating the stock as a strong buy.

'Non-fundamental factors weighing on the share price'

Despite the world opening up after the COVID-19 pandemic, shares for international education service provider IDP Education Ltd (ASX: IEL) have fallen 24.6% year to date.

"We think there are non-fundamental factors weighing on the share price at the moment, with the release of escrow arrangements and the departure of well-regarded CEO Andrew Barkla."

Weick thus feels like the stock will head up as business performance once again becomes the major factor in investor decisions.

"If you look at the policy settings globally, they're the most supportive they've been, in terms of migration for students into IDP's key destination markets," he said.

"You couple that with the investment they've made in their digital strategy, we think they're well-placed to take significant market share and generate very strong earnings growth."

Earlier in the week, Medallion Financial private client advisor Jean-Claude Perrottet praised IDP's reporting season update.

"Margins improved by 24.8%, the highest in the company's history. Revenue grew by 50% on the prior corresponding period, in response to a 45% increase in student placements and a 67% increase in international English language tests."

Growing both organically and via acquisitions

Fellow senior equity analyst Sam Koch likes workforce management provider PeopleIn Ltd (ASX: PPE).

"PeopleIn has been growing organically at about a 10% clip, and they supplement their organic growth through acquisitions."

The business has been hamstrung during the pandemic years, he added, with border closures prohibiting access to the migrant workforce their customers normally utilise.

As international movements are liberalised, according to Koch, PeopleIn's organic growth will accelerate.

The shares have fallen more than 31.7% so far in 2022, putting it into bargain territory.

"You're trading at a sub-10 times price-to-earnings multiple with strong earnings growth," said Koch.

"With an undergeared balance sheet, we believe there'll be plenty of catalysts to see this company rerate."

The post 'Standout buy': Expert names 3 human capital ASX shares to boom appeared first on The Motley Fool Australia.

That is the ASX-listed childcare space. Operators could see a boost to demand under an Anthony Albanese government, according to Canaccord Genuity.

Why this ASX sector is outperforming today

This probably explains why the Mayfield Childcare Ltd (ASX: MFD) share price surged 9.6% to a record high of $1.49.

The G8 Education Ltd (ASX: GEM) and Evolve Education Group Ltd (ASX: EVO) share prices are also beating the market. They are up 3.5% to $1.19 and 0.7% to $0.70, respectively, at the time of writing.

In contrast, the S&P/ASX 200 Index (ASX: XJO) lost its morning gain to trade at breakeven.

Undervalued ASX sector getting a Labor boost

Canaccord said:

The election result over the weekend should be positive for childcare demand, in our view, with childcare being one of the key policies put forward by the Labor party.

The policy is aimed at making childcare more affordable by increasing the percentage of fees covered by the government.

The new federal government plans to increase the maximum childcare subsidy to 90%. It will also increase the subsidy rate for one child in every family and households with incomes up to $530,000.

Additionally, Labor will ask the competition watchdog to design a price regulation mechanism and ask the Productivity Commission to look at ways of moving to a 90% flat subsidy for everyone.

Demand outpacing supply

Albanese is promising that around 96% of families will be better off under its plan and no family will be worse off.

It's worth noting that demand for childcare was already growing strongly before any policy changes were announced.

Canaccord added:

We believe these [policy] changes will have a meaningful impact on demand in MarQ'22 and beyond.

Meanwhile, new supply has come on but not at the rates we have seen previously. Moreover, there has been an increase in closures.

Which ASX childcare shares to buy

But not all shares in this undervalued ASX sector are a buy, according to Canaccord.

The broker is recommending investors buy G8 shares and Mayfield Childcare shares. These shares are trading on attractive valuations and Canaccord is expecting them to post solid earnings growth in 2022.

Its 12-month price target on G8 is $1.42 a share and on Mayfield Childcare is $1.76 a share.

Canaccord is more cautious about the Evolve Education share price. While it looks cheap on a long-term basis, the broker is concerned about the performance of its New Zealand operations.

The broker rates Evolve Education as a hold with a price target of NZ$0.90 a share.

The post Broker reveals undervalued ASX sector with post-election tailwinds appeared first on The Motley Fool Australia.

At today's market close, the Evolve share price finished at 83 cents, down by 2.92%.

Trading update

In today's release, Evolve announced it's achieved a mixed performance across its Australian and New Zealand markets.

For the week ending 23 May, Evolve said its Australian operations were robust. New South Wales and Victoria achieved occupancy rates of 87.8%, with more than 80% in Queensland. The company explained that's a positive result given the business usually records a better performance in the second half.

Across the Tasman, New Zealand has failed to increase occupancy rates post COVID-19. Over the same time period, occupancy rates in NZ stood at roughly 70%.

Evolve has blamed teacher shortages for the performance due to the lengthy international border closures. It said the entire Early Childhood Education (ECE) sector had been affected but it believed this would self-correct when borders re-opened.

Currently, Evolve operates 115 early education centres in New Zealand and 20 in Australia.

On a positive note, the company expects to continue achieving material cost savings through streamlining its centre-based and support office costs.

Evolve declared a cash balance of around NZ$48 million (A$44.7 million) at the end of May.

Guidance for FY21 and FY22

Looking ahead, Evolve provided an earnings guidance based on current market conditions in Australia and New Zealand.

For the year ending 31 December 2021 (FY21), Evolve expects underlying earnings before interest, tax, depreciation and amortisation (EBITDA) to be between NZ$16 million (A$14.9 million) and NZ$18.5 million (A$17.2 million).

In the year ahead, ending 31 December 2022 (FY22), EBITDA is forecast to be around NZ$23 million (A$21.4 million) and NZ$25 million (A$23.2 million).

Evolve share price summary

It's been a disappointing 12 months for Evolve investors, with the company's shares down slightly on this time last year. When comparing year to date performance, the Evolve share price has fallen by more than 30%.

Evolve has a market capitalisation of roughly $140 million, with approximately 159.5 million shares on its registry.

The post Evolve (ASX:EVO) share price dips lower on trading update appeared first on The Motley Fool Australia.

Evolve, which trades on both the ASX and New Zealand exchange, entered a trading halt at its request on Wednesday so it could undertake the placement of new shares.

This morning Evolve announced the successful completion of that capital raising. We look at the details of the ASX education share's placement below.

What did Evolve Education report on its capital raising

The Evolve share price is moving lower in morning trade after the company reported a successful $21.7 million institutional share placement.

The childcare and education centre operator will issue roughly 19.7 million shares ay AU$1.10 per share. That's 8.3% below the closing price of $1.20 per share prior to the trading halt but still 2.7% above the current price of $1.13 per share.

Commenting on the capital raising, Evolve's Managing Director Chris Scott said:

We are delighted with the support for the placement, confirming the investment community's belief in Evolve's value proposition and growth trajectory… The capital raising will contribute to further implementing our Australian expansion strategy, as we believe the current market conditions are highly favourable for centre acquisitions and market consolidation. We look forward to putting investors' money to work.

The company reported that Canaccord Genuity Limited and Petra Capital Pty Limited acted as Joint Lead Managers and Joint Bookrunners to the placement. Settlement on the ASX is expected on Monday, 12 April.

Evolve Education share price snapshot

Evolve has a market cap of $167 million. The company has recently been acquiring numerous new child care centres.

2021 hasn't been off to a great start for Evolve shareholders, with the share price down 12%.

But if you'd bought shares 12 months ago, you'd have watched the Evolve share price rocket 109%. That compares to a gain of 33% on the All Ordinaries Index (ASX: XAO).

The post Why the Evolve Education (ASX:EVO) share price is spiralling lower this morning appeared first on The Motley Fool Australia.

Evolve is a dual-listed company that now operates 132 childcare centres across Australia and New Zealand, with an additional five yet to be settled.

It announced the purchase of 10 Australian child care centres on 5 March, with a total licence capacity of 810 children per day. This resulted in an almost 20 cent jump in the Evolve share price this month, before falling again to its current price of $1.20.

Evolve Education share price on the rise

Today's movement is indicative of a steady recovery for the Evolve share price, which has risen from 71 cents per share at the beginning of November.

Evolve predicts that earnings before interest, tax, depreciation and amortisation (EBITDA) for these five centres will be $3.6 million per annum, and they will settle the remaining five centres by May. Evolve paid $27 million for the 10 centres. 

The company's share price was hit hard by COVID-19 – after a 32% drop in childcare fees throughout the lockdown period – but has also fallen steadily over the past four years.

In 2017, Evolve's share price was more than $3.97 per share in 2017, but the company has suffered from unprofitability. These recent acquisitions were made possible by raising $35 million through the sale of notes, some of which went to repaying Australian debt.

The company has also suffered negative publicity recently. First, for a cancelled contract which would have cut teachers' full-time hours while requiring them to be on call. Second, for charging clients at its Lollipop childcare centre in New Zealand while it was unable to offer services due to the lockdown.

Evolve resuming dividends as new CEO search begins

Evolve recently announced it will resume dividend payments to shareholders this year, although it's yet to announce what they will be, after it last paid dividends of 2 cents per share in 2019, before halting them due to the COVID economic downturn.

Evolve also announced that its New Zealand CEO, Tim Cook, is retiring due to family reasons and returning to Australia, resulting from the lack of Trans-Tasman travel due to COVID-19. 

The company also announced former First Steps General Manager, Craig Presland, will become Evolve's Chief Operating Officer. 

The post Evolve (ASX:EVO) share price lifts after centre settlement, CEO retirement appeared first on The Motley Fool Australia.

At the time of writing, the Evolve share price has jumped 8.47% higher to $1.28. This compares to the S&P/ASX 200 Index (ASX: XJO) which is currently trading 0.86% lower. The company also made a declaration on its dividend payments.

Let's take a closer look at what Evolve announced.

What did Evolve announce?

The Evolve Education share price is gaining in early trade after the New Zealand-based company said in a statement to the ASX it intends to acquire ten additional childcare centres in Australia. The total licensed capacity for the new centres is 816 children per day. The contract is conditional on certain criteria being met – like licensing.

The contract stipulates that Evolve must pay the vendor $27.1 million for earnings before interest, tax, depreciation and amortisation (EBITDA) of $6.9 million per annum. Additionally, in the 12 months following the settlement of the contract, if Evolve's EBITDA totals $8.2 million, then the group will need to pay the vendor an extra $5 million.

Commenting on the deal, Evolve managing director Chris Scott said:

This latest acquisition takes the total number of centres operated by EVO to 116 in New Zealand and 20 in Australia, Minimal additional Support Office costs will be incurred in managing these extra 10 centres.

The company declared the purchases will be funded using available cash on hand. As well, the move "will be earnings per share (EPS) positive from settlement".

In further news driving the Evolve share price, the company also revealed today that it will resume paying dividends in the final quarter of FY21. Evolve advised that further details will be provided regarding the dividend later this year.

Evolve share price snapshot

In the midst of the COVID-19 pandemic, the Evolve share price hit a 52-week low of 37.5 cents. Since then, Evolve shares, along with the market as a whole, has made a steady recovery. If an investor had bought shares in the company this time last year, they would be sitting on a healthy return of around 64%.

Yet, in 2017, the Evolve share price was trading as high as $4.01. That means the company's shares would need to surge by more than 200% to reach this level again.

The post Why the Evolve Education (ASX:EVO) share price is jumping 8% appeared first on The Motley Fool Australia.

According to its most recent quarterly update, the fund manager delivered a 17.5% return for investors during the three months ended 31 December.

This stretched its 12-month return to an impressive 43.1%, which is an outperformance of 16% versus the benchmark S&P/ASX Emerging Companies Accumulation Index.

What has been driving the OC Micro-Cap Fund's strong returns?

There were three key contributors to the fund's strong performance during the final quarter of 2020.

The first was the Galaxy Resources Limited (ASX: GXY) share price, which recorded a 98.5% gain over the period.

OC notes that the lithium miner was a big winner after the "market came to grips with President-elect Biden's ambitious '2050 net zero emissions' target."

It commented: "As a key component in batteries that power electric vehicles, lithium will play a critical role in the achievement of this objective. GXY raised additional capital during the quarter to advance its flagship Sal de Vida project and is now well capitalised to achieve its first production later in 2022."

It believes Galaxy will continue to benefit as the global economy looks toward sustainable avenues for growth.

What else underpinned OC's strong performance?

Another big winner for OC was the Telix Pharmaceuticals Ltd (ASX: TLX) share price. The Melbourne-based biopharmaceutical company's shares rocketed a massive 127.7% during the quarter following a series of positive updates.

One of those was a strategic partnership with China Grand Pharmaceutical and Healthcare Holdings (CGP) for the greater China market worth upwards of US$225 million in regulatory and commercial milestones payments.

OC commented: "We see CGP's investment as a vote of confidence in TLX's pipeline by a company with experience in nuclear medicine (CGP acquired ASX listed oncology and nuclear medicine business Sirtex Medical in 2018)."

Although OC has trimmed its holding slightly, it remains positive on the company's long term prospects.

It explained: "TLX has an impressive late-stage portfolio with numerous catalysts in 2021 including regulatory approval and commercialisation of TLX591-CDx (prostate cancer imaging) which has revenue potential in the hundreds of millions of dollars and a tier-one US-based partner, Cardinal Health, ready to sell its product in the US. We have trimmed our holding into recent share price strength but remain excited about the outlook for this well managed company."

Evolve charges higher

Finally, the Evolve Education Group Ltd (ASX: EVO) share price was another positive contributor to OC's performance during the quarter.

The childcare company's shares rose 70.2% during the period thanks largely to a solid operating update in October. That update demonstrated how the largely NZ-based company was emerging in excellent condition following its COVID-19 lockdowns.

OC remains positive on its prospects, noting that it believes "EVO is well positioned for the ongoing expansion of its Australian beachhead in 2021 and we remain holders of the stock."

The post 3 ASX shares that helped this fund manager smash the market appeared first on The Motley Fool Australia.

WAM operates several listed investment companies (LICs). Some focus on larger companies like WAM Leaders Ltd (ASX: WLE) and WAM Capital Limited (ASX: WAM).

There's also one called WAM Microcap Limited (ASX: WMI) which targets small cap ASX shares with a market capitalisation under $300 million at the time of acquisition.

WAM says WAM Microcap targets the most exciting undervalued growth opportunities in the Australian microcap market.

The WAM Microcap portfolio has delivered gross returns (that's before fees, expenses and taxes) of 23.5% per annum since inception in June 2017, which is superior to the S&P/ASX Small Ordinaries Accumulation Index average return of 10%.

These are the two small cap ASX shares that WAM outlined in its most recent monthly update:

Evolve Education Group Ltd (ASX: EVO)

According to the ASX, Evolve Education has a market capitalisation of $185 million.

WAM explained that Evolve Education operates 120 childcare centres for pre-schoolers across New Zealand and Australia.

In November, the small cap ASX share announced its interim result for the six months ending 30 September 2020 showing net profit after tax (NPAT) of NZ$6.2 million, which was up 533.2% compared to the prior corresponding period.

Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) was within the guidance range of NZ$14.4 million to NZ$14.8 million.

The fund manager said that the childcare industry has been significantly impacted throughout the coronavirus pandemic, and WAM believe the government will continue to support the industry as individuals return to the office and the expected need for childcare services increases.

WAM also sees the ability for the small cap ASX share to make accretive acquisitions with its strong balance sheet. Evolve was one of WAM Microcap's biggest 20 positions at the end of November 2020.

Mach7 Technologies Ltd (ASX: M7T)

According to the ASX, Mach7 has a market capitalisation of $291 million.

The fund manager explained that this company develops data management solutions for healthcare providers to own, access and share patient data.

In the first quarter of FY21, Mach7 said that it generated $3.3 million (total contract value) of new sales orders for the quarter and recurring revenue grew by $0.9 million per annum. Nine new customers were added with two customers going live on the Mach7 platform. During the quarter, Boston Scientific Corporation licensed the Mach7 enterprise imaging platform to implement and utilise the platform, and plans to extend and enhance their imaging and research capabilities across the enterprise.

Early on in the quarter, Mach7 acquired Client Outlook and it had already achieved $1.5 million of cost synergies at the time of the update.

Mach7 has been investing in marketing after the acquisition and its eUnity viewing and integration platform, to raise global brand awareness and loyalty.

In November, Mach7 signed a seven-year contract with Trinity Health, the fifth largest integrated delivery network in the United States, valued at $5.3 million. The contract will see Mach7's eUnity enterprise viewer, a diagnostic imaging platform, installed in 92 hospitals across 22 states.

WAM is positive about Mach7's opportunity to expand its operations in coronavirus impacted regions such as the United States.

The post Wilson Asset Management thinks these 2 small cap ASX shares are a buy appeared first on The Motley Fool Australia.