Consumer cyclical

IDP consolidates global footprint with $83m acquisition of Intake

Tue 20 Sep 22, 12:43pm (AEST)
English book
Source: Unsplash

Key Points

  • Intake is the market leader for UK study in several countries
  • Management provided no guidance on what the Intake acquisition will do to future earnings
  • Morgans target price of $31.10 does not factor-in Intake and/or other acquisitions

Four weeks after reporting a strong full year FY22 result on the back of a post-covid recovery in Australian student placements, international education provider and S&P/ASX100 company IDP (ASX: IEL) has further consolidated its global footprint with the $83m acquisition of Taiwan-founded student placement agency Intake.

News of the acquisition found favour with the market this morning with the share price up 3% an hour out from the open.

Established in 1993 as UKEAS, Intake is the market leader for UK study in several countries, and has operations across Nigeria, Ghana, Kenya, the Philippines, Thailand, Taiwan, India and has the largest agency in West Africa.

IDP expects to complete the acquisition in November through a combination of existing cash and debt.

Commenting on today’s announcement, interim CEO Murray Walton told investors that the geographic footprint of Intake complements IDP’s global network.

Upside to price targets

Management provided no guidance on what the Intake acquisition will do to future earnings and/or profitability.

However, Morgans which maintains an Add rating on IDP, reminds investors that the broker’s target price of $31.10 does not factor-in Intake and/or other acquisitions.

Following on from the strong momentum reflected within the FY22 result, the broker also expects IELT's (English-language testing) volumes – which were flat half-on-half - to improve over FY23, along with price and gross profit margins.

What happened that FY22?

After two years of border closures IDP more than doubled its adjusted net profit to $106.6m for the year to June 30.

The company reported a 50% increase in revenue to $793m, and earnings (EBIT) of $163m, up 127%.

IDP declared a final dividend of 13.5¢ per share, for total dividends of 27 cents per share for the full year.

At the full year the company provided no guidance on FY23 earnings.

Record enrolments

Along with other major destinations, management noted that early signs suggest record enrolments in Australia.

The company placed a record 55,400 students, up 45% across all markets.

Due partly to the buyout of an Indian IELTS business from the British Council in July last year, the company also experienced its highest ever volume of IELTS, administering 1.92m tests, up 62%. 

What other brokers think?

While IDP is down -12% over 12 months, the share price has been trending up since plunging to a low of $20.53 mid-June 2022.

Consensus on IDP is Strong Buy.

Based on Morningstar’s fair value of $26.08 the stock appears to be overvalued, but this pre-dates today’s announcement.

Based on the five brokers that cover IDP (as reported on by FN Arena) the stock is currently trading with 19.1% upside to the target price of $32.90.

Macquarie notes improved margins of 24.8% within the FY22 result - the highest since the company listed – highlights the operating leverage of the business, with the company benefiting from the synergies post the Indian acquisition and the higher usage of the computer-delivered centres.

The broker retains an Outperform rating, $32 target price and adjusts earnings forecasts by 5% for FY23 and 6% for FY24.

UBS believes the further expansion of the company's IDP Live is a means to unlocking future material growth and reaffirms the company's technology differentiation.

The broker retains a Buy rating and the target price increases to $34.70 from $34.60.

Watch for broker upgrades following today’s announcement.

IDP Education share price over one year.


Written By

Mark Story


Mark is an investigative financial journalist and editor who started his career working for Marathon Oil in London. He has a degree in politics/economics and a diploma in journalism. Mark has worked on 70-plus newspapers and financial publications across Australia, NZ, the US, and Asia including: The Australian Financial Review, Money Magazine, Australian Property Investor and Finance Asia. Mark is passionate about improving the financial literacy of all Australians through the highest quality content. 

Get the latest news and insights direct to your inbox

Subscribe free