‘Can’t help but grow’: one fundie’s view on OpenLearning
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Special Report: Fund managers are leaping into the online learning sector, and this one likes OpenLearning in particular.
Online learning is one of the top tech sectors on the ASX and around the world, thanks to the COVID-19 pandemic forcing schools and universities to close.
If there is any time there was a tailwind incentivising schools to go digital, it’s now as education centres from daycare to tertiary are forced into some level of digitisation due to closures, says Cyan Asset Management portfolio manager Dean Fergie.
“What part of the market would you want to be in other than online learning right now?” he told Stockhead.
Cyan’s portfolio was strongly aligned with the online learning sector before the pandemic hit, and the best performing year-to-date stock has been higher education software-as-a-service (SaaS) company OpenLearning (ASX:OLL) which it invested in during the December IPO.
OpenLearning provides a platform that allows universities and other higher education institutions to offer interactive and engaging short courses, degrees and micro-credentials to millions of learners worldwide.
“Because there’s been a move to online, businesses that operate in the online learning space like OpenLearning can’t help but grow,” Fergie said.
He liked the combination of recurring revenue and development revenue (money made when the company sets up new contracts), and the kinds of deals the company was bringing in.
Since the COVID-19 pandemic broke OpenLearning has signed a deal with Alibaba Cloud to open its online learning services to mainland China, just as educational institutions were rapidly moving classes online to cope with the COVID-19 outbreak, and a usage-based SaaS and reseller agreement with High Resolves, a global not-for-profit, to give it online access amid COVID-19 school closures.
OpenLearning is still in the early stages, but annual recurring revenue was up 80 per cent year-on-year in the March quarter and it has 18 months of runway without factoring in growth, Fergie says.
“I think OpenLearning is a smart place to be in a sector that is very, very countercyclical with businesses that are fairly well funded. It’s hard to see how you can go wrong.”
Cyan’s bet on online learning appears prescient now, as the educational world has been forced to spend on digital learning platforms to deliver courses.
With the money now spent, institutions are unlikely to scrap digital programs when normal life resumes.
“Even three months ago you’d have said banks, toll roads, airports, hospitality, gambling will always be around and it’s all completely changed. But I think it’s a sure bet that kids will continue to be taught,” Fergie said.