CAREER POINT Ltd
Computer Point Ltd. (CPL) is in the process of restructuring, wherein the education business will be demerged into a separate listed entity (CP Edutech Ltd.), leaving CPL with the NBFC business.
CPL offers diverse products & services across the entire spectrum, starting from Pre-school, right upto Engineering/ PHD courses. Apart from the Universities managed by them, it offers numerous distance learning courses. The Company has established a niche in test preparation and school curriculum tutoring through a nationwide network of branches. It runs an asset light model & is growing at a fast pace. Apart from a few owned centres, there are a number of franchisees & school association centres, currently a network of about 86 centres in 73 cities across 21 States & counting.
CPL is also running schools & universities in Kota, Jodhpur and Hamirpur. Education is a negative working capital business. Every time a student is enrolled, cash flows are received upfront, and are assured for the entire duration of the course which could run over a number of years. Setting up a university also has huge entry barriers as it requires a state legislature approval, entailing a huge amount of liaisoning, in addition to the capital investment.
The NBFC part of the business funds the institutions (schools/ colleges) & is entitled to interest income while the education business manages them for a mgt. fee. The entire operations are managed from internal resources (including the NBFC business) as the Co. is pretty much debt free.
It is pertinent to note that while some more illustrious names in the industry have been burning money, threatening their very survival, CPL has always been profitable, even during Covid times.
For the current year, CPL should do revenues of about 107 crs with profits of about 58 crs. The market cap is only about 457 crs so the investment is available at rather attractive valuations. Further, the Company is currently available below its book value, leaving enough margin of safety.
CPL announced a second interim dividend along with its Q3 numbers, something not done before. It could well be an effort at catching investor fancy/ interest for the stock & following on in the same vein, a decent final dividend could very much be on the cards. Besides, the Co. has invested enormous efforts & time at the ongoing de-merger exercise. A pre-curser to the value unlocking going forward?!
Disc: Invested.
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