Poor Chart, Poor Fundamentals, page-25

The new management strategy of improving the quality of the product rather than increasing the quantity is the exact required strategy to create growth in occupancy and increase in fees.

As a parent, quality of child care is the primary consideration when selecting a child care center and this definitely does not mean a flashy new building with all the latest playground equipment. It is all about the the quality of the staff, how they interact with the children and effort that put into preparing and developing activities to help develop your child.

Improving quality is therefore is not going to be expensive however it requires micromanagement of staff employment by a person experience in finding a quality child carer and knowing which staff to get rid of. Once the product is the premium one on the market the centers will fill up and fee increases will follow.

With the tails winds created by the new government incentives G8s income will rise even if the management fail to increase the quality, it is highly unlike to fall. The income and share price will continue on similar to what it is now, which seems good value of a PE of 11.

If management deliver on significant improvement on the product quality then this will be a good growth share. To me there is low risk on losing money on this share however there is a significant upside.This maybe why Morning Star and other brokers have a buy or strong buy on this share.

After completing my research this week end, I will be buying a large chunk of shares on monday for income with the hope the management improve the quality and watch this income share become a growth share as well.