Sleeping giant, page-23

From the Capital H November newsletter. Their fund is up 55% since June 2018. SCL shares trading at around 2.2c at the time. Good research on their business on the Capital H site, just google Capital H Management

Fund Operations
SCL continued to trend higher. I think the market is yet to recognize the quality of the business. Platform businesses are highly valuable when they get momentum and SCL, while still small, appears to be gaining traction.

I caught up with management during the month. Their school numbers continue to trend higher, candidate numbers are growing at the fastest rate in the company’s history and they were halfway through what is typically their strongest quarter.

I’d expect them to approach ~400 schools on the platform by the end of this calendar year and 500 should be achievable within 12 months, taking them to sustainable profitability which, if achieved, would spark a significant re-rate.

Their growth may be subject to seasonality, but the core driver - the rising demand for an international school education and the shortage of teachers to fill these roles - will persist for the next decade.

Combined with the winner-take-all dynamic of platform businesses and SCL’s current leading position (next to one other platform), that should equate to a long runway for growth. The market likes these businesses.

At a $20m market cap the core business is still undervalued and there is essentially zero ‘blue sky’ priced into the stock. While it has had a good run and there is escrow stock to work through, I think there is scope for further upside over coming months.

SCL was discussed in the AFR in early December with a brief mention of the recent appointment of an ex-Navitas director. He is based on the east coast, which should help lift the company’s profile. The article is linked below:

https://www.copyright link/work-and-careers/education/the-rod-jones-effect-business-of- education-rises-in-the-west-20191129-p53fbe

We added modestly to our position.