MoneyTalks: Kip McGrath could be worth triple its current price, says broker

Broker CCZ Equities has picked two ASX educational stocks as a Buy
The broker gave 3P Learning and Kip McGrath lofty price targets
Below is CCZ’s investment thesis for these two stocks

3P Learning could go almost 50% higher

Broker CCZ Equities has given online learning specialist 3P Learning (ASX:3PL) a Buy call with a target price of $1.84.

3PL closed on Friday at $1.26.

CCZ believes 3PL could have a huge upside because the company has new products which are approaching the revenue generation stage.

Programs nearing development completion include ‘Mathletics’ and ‘Writing Legends’, both of which are expected to launch in the second half of FY23.

CCZ believes that with a redefined B2B (business to business) sales function announced by 3PL recently, these new products could drive new students and improve retention in FY24 and beyond.

3PL’s new B2B sales strategy is seen by CCZ as a smart move that could reclaim the company’s segment dominance.

“3PL’s sales strategy has transitioned to Solution Selling, providing schools with a simple and flexible solution across learning areas, which we anticipate will increase licence volumes and better retention rates,” said the broker’s note.

In addition, CCZ also thinks that 3PL’s growth in the B2C (business to customer) segment will remain robust as parents refuse to slow down spending on their children’s future despite higher interest rates and inflation.

The broker anticipates B2C revenue growth to continue particularly after the 30% price increase that 3PL announced for all new users across all markets effective in January.

Kip McGrath could almost triple

Another education play, Kip McGrath Education Centres (ASX:KME) also got a huge target price call from CCZ Equities.

The broker has a share price target on KME at $1.68, which is almost triple its current share price of $0.57.

Kip McGrath provides live and interactive lessons online or in centre, mainly in the core areas of English and maths.

CCZ likes the stock because it believes Kip will have a material upside from its rollout and market expansion strategy.

In a recent release, Kip explained this expansion strategy, saying that it will grow educational centres from 522 to 800+ in existing markets. Of that, Asia and the US could account for 700 centres.

“Our forecasts reflect a conservative corporate rollout and don’t incorporate a US or Asian store rollout,” CCZ said.

CCZ also believes that Kip can increase revenue by extending its operating weeks in the year from 40 to 52 weeks.

“KME’s core business appears to be performing strongly.

“As a result, we expect KME’s earnings to improve in the second half, which should highlight the upside from a successful corporate rollout and potential expansion into the US and Asia,” said the note from CCZ.