(Un)Intelligent Investor Article, page-65

Hi Islay:
You wrote: "Highly regulated industry reliant on government funding". You implied that these are bad characteristics of GEM and presumably others in the industry. I just pointed out that these are also characteristics of other industries (healthcare, aged care, superannuation industry), so a logical inference is that you don't think those industries should be invested in either.

Sorry, but I don't think my statement suggested readers can't make their own investment decisions. I was just making a logical deduction from your statement, which you derived from Kohler's article.

I stand corrected on the pub date (Aug13, not 2014). It seems to be the most recent detailed gov't policy analysis report (more recent reports provide the stats, no policy discussion). I don't think the childcare situation has changed so much in 18 months that this report's policy conclusion should be dismissed so strongly.

We do agree that the changing ratios in childcare will be an issue and concern financially, although more importantly a benefit to parents and society. How much will that hurt company profitability? As you stated in an earlier post, these ratios aren't scalable. What might not be apparent -- and i could be wrong here -- is that small operators will be LESS able to adjust cost-efficiently than will be GEM and other large multi-centre businesses. I described this in an earlier post regarding employee development, along with issues of brand value for parent trust. But there may be other scaling advantages I haven't discussed yet (e.g. optimizing child educator ratios across centres). Here's my earlier post.
http://hotcopper.com.au/threads/un-....2465101/page-6?post_id=14835434#.VQSid0Iz4Q4

Finally, one poster commented this week on center quality (I think questioning GEM's quality vs small operators, but can't recall). The earlier post linked above cites a website where parents comment on center quality. Difficult to get an overall picture, of course, let alone address the representative sampling problems. But look at GEM's brands on that site and you may get a sense that the company does provide quality services.