Arowana lodges Intueri Education IPO prospectus

Arowana International managing director Kevin Chin says the company’s pure play education spin-off is poised for growth on the back international students demand and the move to online only study.

The company lodged a prospectus on Tuesday for the initial public offering of Intueri Education Group, as flagged by Street Talk, which values the company between $NZ243 million and $NZ293 million ($224 million to $270 million).

Intueri will seek to raise up to $NZ234 million. About $NZ60 million will be used to buy the Quantum Education Group. Arowana, which has a market value of $142 million, will retain a 25 per cent stake in the education spin-off.

Intueri is the largest vocational training provider in New Zealand, with 5,950 students in 2013. It operates six private colleges that offer a range of courses including hairdressing, hospitality, fine arts and commercial diving. It also has a 50 per cent stake in Online Courses Australia, a digital-only provider of a range of vocational courses that had total enrolment of 2,182 in 2013.

Assuming the Quantum acquisition is completed and taking into account the OCA stake, Intueri is forecast to grow pro-forma revenue of $NZ76.9 million in 2014 to $NZ86.4 million in 2015 (12.4 per cent). Similarly, pro-forma earnings before interest, tax, depreciation and amortisation is expected to rise 18.5 per cent from $NZ25.4 million in 2014 to $30.1 million in 2015.

Encouraging outlook

Mr Chin said the outlook for the education sector in Australia and New Zealand was promising, due to both countries being attractive to Asian students. “New Zealand, in particular, has always been an attractive market for education for safety and affordability reasons,” he said.

The move to flexible, online study would also drive growth in the sector, he said. But Mr Chin said he was not worried by the rise of free university subjects being offered as MOOCs – massive open, online courses – on websites such as Coursera.

Mr Chin said the MOOCs were too large and available to be taken seriously by employers. But he also added completion rates in some cases was as low as 10 per cent, which raised questions about the MOOCs’ quality. “The term massive is a misnomer,” he said.

He said the key to building value in the online education business is to ensure courses are relevant to employers. “We as Intueri, have to have a course that an employer will look at… and know it’s legitimate,” he said.

Arowana, which also has businesses in the events and diagnostics, made its first investment in the New Zealand private education sector in 2010, when it bought a college in Christchurch. The strategy was initially plagued with bad luck, given the city was struck by two earthquakes.

Mr Chin said Arowana would use some of the proceeds to move into primary and secondary education in Asia. “We’re not getting out of education.”

Intueri, which will be dual listed on the Australian and New Zealand exchanges, will compete with Navitas and Vocation, which have market values of $2.6 billion and $468 million respectively. Navitas shares have gained 43 per cent in the past year. Vocation shares have gained 19 per cent since they listed in December.

The company will undertake a bookbuild on May 6 and subject to Arowana shareholder approval, Intueri shares are expected to commence trading on May 23.

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