G8 educaiton (ASX:GEM) have announced a 28.5% increase in its annual dividend. This is a stock i may or may not own, but i believe sticking to the facts is always important. The stock has rallied about 6% in response to this announcement. I've also noticed the "updated broker" valuations which seems interesting but not something I'd use in my own models. I'd watch to see how much they're paying for their acqusitions. Their horizontal integration is moving along at a hefty pace but they've broken their own rules and payed almost 6 times EBIT for their Sterling acquisitions. They are doing so to reduce overheads and gain economies of scale, and im assuming to eliminate competition at the same time among other things. The good news though is that most of the market (about 80%) is independently owned, and i believe don't have much bargaining power. I question if there's potential for a monopoly here. This strategy was adopted by ABC Learning Centres but did so in a way that made no money. That's why i believe it's important to watch out for what G8 Education is paying for their acquisitions to ensure they're not paying some absurd amount. G8 eduction owns about 10% of the childcare market and has alot of room to move.
Enjoy :)
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