KGIC Inc (LRN.V)

A consolidator of international schools for people coming to Canada to learn English. Nice group. Expanding. An alright company.

Just came out with earnings this morning. Numbers looked fantastic. Have come out with good numbers, but stock just kind of drifted of late. Thinks this will change with today’s numbers. Made a big acquisition last fall which basically doubled the size of the company. That was a private business so it came with a lot of excess fat on the numbers so the quarter that they announced before this, their margins went right down. Margins have now returned. There are 2 areas of growth for this company. 1.) Canadian government said they want more students to come to Canada to learn English. 2.) Have never taken advantage of the housing, and foreign students have to stay somewhere so Loyalist has just started to get into that business. We’ll see that revenue ramp up going forward. Stock is pretty cheap.

An “English as a 2^nd language” roll up story. Stock has been creamed over the last couple of months. Was a very good growth story, but last quarter was quite disappointing. Margins were being compressed. They said there was some seasonality to it. Next quarter will probably be a little bit better, but this is in a “show me” state.

Is a roll up of language schools across Canada. A great cash generator. They are digesting big acquisitions right now. The stock got a little ahead of itself. Hold on and maybe next quarter is mixed and then you see the fruits of the acquisitions. It’s a bit of a show-me story over the next few quarters.

Came out with a weak quarter and then a better one. English as a second language. They are getting into dormitories for foreign students. High margin / high profile. Expects earnings to keep increasing. This is a reasonable entry point. An underfollowed story.

They own, operate and consolidate ESL schools, but not the ones where locals go, it is only for foreign students who come to Canada, who are less price sensitive, so pay more. 3^rd quarter earnings were spectacular. Net earnings margin has been 20%. What really gets him excited is that they are now entering the student housing business. Have 4500 students who come to Loyalist schools today and they need to live somewhere. Have a pilot project starting in January with a small number of students and margins are fantastic. If they can grow this out over the next few years to what he thinks they can, that alone is worth potentially $100 million and the market cap today is only $80 million. $1.30 in 12 months is reasonable.

(Market Call Minute.) Wouldn’t buy right now. They are probably going to raise money. Their acquisition strategy needs to be proven better.

(Market Call Minute.) Education in language skills. Have announced some recent acquisitions. Still lots of growth opportunities for them.

Likes it and has owned it. It is a consolidation in an industry that is very fragmented. Is a consolidation story.

This market is something like $700 million and they have about $60 million of it. Teach English to people who come here to learn. This is a big market as there are billions of people in the world that want to learn English and they want to do it in English-speaking countries. Acquiring small companies and amalgamating them to cut costs. Very well run. Has a lot of legs. In his mind, it will be worth more than $1 per share in a year.

(A Top Pick Aug 7/12. Up 169.23%.) Bought some recently. They are just starting to scale up now. Have lots of analysts covering it. Language education. Lots of customers and lots of demand.

English as a second language schools. A great company in what they are trying to do. Revenues were up 50% in the recent quarter. Net income was up 94%, net margins were up 490%. Are acquiring Ma dn Pop schools. They are the first to do this and analysts are just starting to follow them. Have good shareholders. Could be a great story over the next few years. Just acquired MTI Community College.

This is a company that is consolidating the learning centers in Canada. Have been growing very, very fast. A little bit too early to get too excited about this company. Very interesting and very well managed but he is not convinced it has a competitive edge yet.

(A Top Pick Aug 7/12. Up 111.54%.)

Language schools teaching English. A wonderful space to be in. CEO is very adept at what he is doing. Margins are excellent. Fragmented sector and this company is acquiring.