Most of you should know that iron ore is our number one export, and that coal takes second spot.  Some of you might know that natural gas bumped gold from the number three spot in FY 2014.  So what now ranks fourth?  It is not gold.  The fourth largest export out of Australia is now education-related travel services.

Here is a somewhat dated graph created before natural gas and education-related travel services dropped gold to the number five spot.

In May 2014 the Australian Government Department of Education reported the income derived from this category rose almost 4% to approximately $15 billion.  So what are education-related travel services?

For some years now students from non-English speaking countries have been leaving home to get an English language education.  Despite our relatively small population, Australia is now third on the list of destination countries for these students, trailing the US and the UK.  Updated figures are hard to come by, but some estimates state there are now more than 500,000 foreign language students attending Australian educational institutions.  Every dime they spend here on tuition, living arrangements, shopping, entertainment, and transportation is included in the category of education-related travel services.

While hardly the size and scope of the baby-boomer retirement trend benefiting healthcare stocks, international students studying in English language countries is a trend that has been around for some time and it is growing.  In Australia, the average annual rate of growth in enrollment here over the last 10 years was 5.9%, according to the Department of Education.  A Sydney Morning Herald article back in April 2014 reported that Sydney had been ranked the most popular city on the planet for International university students, according to consultancy firm A.T. Kearney.  There are about 100,000 foreign students in Sydney at universities and in vocational and English language teaching programs.  The following table shows the growth of enrolments, broken down into educational category.

Historically China, India, and South Korea have topped the list of foreign students studying abroad but enrolments out of the Middle East and North Africa are on the rise.  Initially focused on college, university, and vocational education, the trend is expanding to secondary education.  Across the Asia Pacific Region parents are sending their children off to private high schools in foreign countries.  The latest country to show substantial growth is Vietnam, where parents spend about $1 billion per year on foreign high schools, colleges, and universities.  The trend towards high school education is meant to give students a better chance at getting in at the college or university of their choice.  

In 2004 there were 16,000 foreign students enrolled in US high schools.  That number grew to more than 73,000 by 2013.  Education in a foreign country is an expensive proposition. 

With the Australian dollar in retreat, study in Australia is likely to become a more attractive option for families struggling to meet the costs of an English language education.  All over the world private firms are emerging to help families navigate the arduous process of getting into a foreign country for educational purposes.  Many firms operate as finders with no direct affiliation with a foreign educational institution.  The costs to the students and their families are substantial.

Here in Australia we have three publicly traded companies that provide both assistance in finding programs and also provide actual educational offerings.   Another company that operates as a finder firm, IDP Education, is expected to go public later in 2015.  The following table lists the three ASX stocks that are directly involved in the education-related travel services sector.



Market Cap

Share Price

52 Week % Change


Dividend Yield

3 Year Total Shareholder Return

Navitas Limited








Academies Australasia Group








Redhill Education








Navitas Limited (NVT) is by far the largest of the three and the only one with major analyst coverage.  Right now the company has a Hold consensus rating with 2 analysts recommending Buying the stock, 7 at Hold, 1 at Underweight and 1 recommending investors sell.  Navitas has a 2 year earnings growth forecast of 14% with dividends forecasted to grow by 20.7% over the same period.  The current dividend yield is fully franked.

Navitas has the largest range of offerings of the three companies and is the only one to offer its services directly to the finder agent companies representing foreign students.  The company has three divisions.

The University Division operates 32 university programs in Australia, UK, US, Canada, New Zealand, Singapore and Sri Lanka; as well as pre-university and pathway programs into the university of choice for the student.  In the United States Navitas has a partnership arrangement with campuses of both the University of Massachusetts and the University of New Hampshire.  The company follows the same partnership model in Canada, the UK and New Zealand.  On each campus Navitas hosts a Pathway College to offer the kind of additional support and assistance foreign students often need in adjusting to different cultures.

The SAE Institute offers technical educational programs in creative media and film production.  The most promising market here is the US where NVT plans to expand its diploma programs to associate and bachelor degree programs.

The Professional and English Programs (PEP) Division offers a comprehensive range of educational services from placement to graduation with certificate and diploma programs as well as master’s degree programs.  PEP provides placement services and offers English as a Second Language Education for its foreign students.  

Finally, PEP offers customized training solutions to businesses.  

NVT has a P/E of 37.9, far above the sector P/E of 19.05 but growth stocks frequently have high P/E’s.  However, the valuation can make investors nervous.  In July 2014 with the Full Year Results, and again with the recently reported Half Year Results, the company reported a 13% profit loss due to a one-off goodwill impairment.  Removing the impairment charges showed respectable 12% increase, but investors would have none of it and punished the company.  Here is a two year price movement chart for NVT.

The share price reached its all-time high of $7.88 before the earnings release and has dropped to around $4.75.  Some investors might call that a buying opportunity.

Academies Australasia Group Limited (AKG) reported poor Half-Year Results on 11 February with a 64% drop in NPAT, despite a 36% increase in revenue. Management offered the explanation of recruitment policy changes initiated by two of its University Pathway Partners resulted in reduced enrolment.  Management went on to say regulatory changes in international recruiting soon to be in place will keep the problem from recurring.  The company also incurred capital improvement and acquisition costs and saw subsidy reductions in local vocational training.

Investors didn’t like the profit drop and were not soothed by the management explanations.  The share price collapsed, and is still falling.  Here is the chart.

The $1.40 mark reached in July 2014 was an all-time high for AKG and followed the announcement of its intention to acquire private training firm Spectra Training.  The acquisition was part of the company’s diversification strategy and will provide educational offerings in the Health and Community Services sector.

AKG operates 18 colleges across Australia and in Singapore offering senior high school and English language programs for foreign students as well as certificate and diploma programs and coursework leading to a Bachelor’s or Master’s degree.  Academies Australasia has direct pathway programs enabling students in skill training and other diploma or certificate programs to move into accredited Australian Universities on completion of study at AKG.  

The company was once known as Garrett’s Limited and began acquiring educational institutions back in 1999, shedding its other businesses along the way.  In 2010 Garratt’s acquired Academies Australasia Polytechnic and adopted the name.  The final non-educational business was divested in November 2013.  The company has been operating as AKG since 2010 and has grown earnings at an annual rate of 15.2% since that time.  Over the same period dividend payments have grown 12.9%.  While some might look at AKG right now as a potential falling knife, its strategic acquisitions in the skills training fields badly needed in Australia and elsewhere suggest it at least deserves a spot on a watch list.

Redhill Education (RDH) has been in business since 2006 and began trading on the ASX at an issue price of $1.00, closing at $1.20 on its first day of trading.  The company has four operational segments.

Three are core educational institutions with Greenwich College providing English language studies; The Academy of Information Technology providing training in digital design, multimedia, gaming, and business information technology; and The International School of Colour and Design (ISCD) which offers training in interior design.  The fourth segment, Go Study Australia, is what makes this company somewhat unique.  This is a recruitment, placement, and support agency for International students who want to study in Australia.  Go Study Australia helps the students find the appropriate vocational training, English language, or University study anywhere in Australia.  Students are not charged for this service.  Instead, the company gets referral commissions from the educational institutions where the students are placed.  The company’s Full Year 2014 results were outstanding, with a 19% revenue increase accompanied by a dramatic 651% rise in net profit after tax (NPAT).  Here is a one year price movement chart for this thinly traded small-cap stock that deserves a place on any investor’s radar screen.

Finally, watch for the IPO of IDP Education.  This is strictly a student placement business, with more than 80 student placement centres spread across 25 countries.  The company boasts placing over 400,000 students in educational programs in Australia, the US, the UK, Canada, and New Zealand over the last 45 years.  The company is jointly owned by 38 Australian Universities and online job placement and educational operator Seek Limited (SEK).  Seek is reportedly looking to divest its 50% holdings in the public offering.  IDP is also one of the co-owners of IELTS, the International English Language Testing System, used by more than 9,000 institutions around the world to assess English Language proficiency.  IDP reports that more than 2 million tests were administered last year.

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