• Trades in line with our valuation.
• Offers exposure to attractive business in University Partnerships which is operating at a maintainable ~22% EBITDA margin, is showing increasing and high student retention rates (+80%) and successful pass rates (+84%) as well as CAGR growth of +5% going forward.
• Risk of losing college contracts with partner universities reduced with renewal of six contracts in FY18 and only three contracts due for renewal in the next year.
• Potential short-term risk from anti-immigration policies in the US and UK which affect enrolment growth.

• Negative surprises around remaining three contract renewals with partner universities over the next year.
• Increased regulatory hurdles for immigration and visa in the US and UK may impact earnings.
• Slowdown in migrant arrivals and potential government cuts to funding for migrant English services, for the PEP business.

• No immediate outlook but longer term guidance reaffirmed. CEO David Buckingham highlighted that “NVT is well positioned to excel in an evolving education sector” despite some market uncertainty. Management reaffirmed its 2020 growth targets of

1. CAGR growth of +5% group revenue;

2. 18% group EBITDA margin;

3. Enrolments in University Partnerships is expected to grow at 5% CAGR

4. Capex is expected to reduce below A$20m p.a.

• Strong longer term global growth in enrolments expected but short-term risk with anti-migration policies. NVT saw +6% growth in student enrolment across its University Partnerships (excluding closed colleges) on continued strong demand for quality education opportunities by international students. Average fee growth of +3% was marginally offset by a change to lower priced courses due to courses in Australia and Canada being cheaper than courses in the U.S and UK. In Australia and New Zealand, enrolments increased +11% due to Simplified Streamlined Visa Framework (SSVF) partially offset by changes in working rights (tougher work visa conditions). UK enrolments increased +6% as European students seek admissions in UK universities before Brexit. North American enrolments were flat on pcp with growth in Canada offset by declines in the U.S. on increased visa rejections under the new U.S. administration. In our view, we expect the higher visa rejection rates and uncertainty around immigration policy changes to impact U.S. enrolments and presents a short-term risk to NVT’s earnings.
• College contract loss risk reduced with the renewal of its majority contracts. New contracts were obtained with the Virginia Commonwealth University in the U.S. and Murdoch University in Dubai which bodes well for future earnings. Six contracts were renewed under similar terms and conditions, leaving only three contracts due for renewal in the next two years, reducing previous potential downside risk to earnings. Swansea College was converted to a Joint Venture. Contracts up for renewal include University of Canterbury (November 2018), University of Portsmouth (February 2019), University of Plymouth (March 2019).