Firstly there has been a significant influx of capital from China via the SIV and Premium investor schemes. In November 2016 China and Australia signed an MOU to make the flow of capital transparent.
From about this date Chinese capital was severely curtailed . A significant portion of Chinese investment was driven by the capital flight into Australia from China.
Moelis Capital a company that specializes in both Visa driven investment and various other forms of Chinese capital investment is central to most of G8s previous capital requirements. Here is a link to one of the announcements you can find more if you DIY research.
As the presentation by Moelis indicates 89% of their capital comes from China. Please also note the mention of child care investments, the 50 or so staff dedicated to visa investment
The overpriced contention comes from the observation that G8 are roughly paying 3.5-4 x EBITA. When you look at the normal multiples of premium childcare centers it is closer to 2 x EBITA. This comes from the various announcements that G8 have made themselves about acquisitions
EBITA is a classic accounting way to build into a business a higher value than being experienced . For instance if you depreciate capital expenses over a longer period then then your EBITA improves . When I see EBITA used as a valuation method it immediately raises alarm bells because ABC Learning used this just methodology .
As for ELK its not been one of my better investments in a long successful career (we all have them)
GEM Price at posting:
$2.06 Sentiment: None Disclosure: Not Held
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