Worldwide Markets 696: Education stocks, ADvTECH vs Stadio

*Recorded Tuesday 29 September 2026 for 30 September. Lightly edited for readability.*

**Simon Brown:**

Markets this week. Education stocks: only two left, but which one is the smart investment? Government bond yields everywhere are going higher, even our local ten-year, and the MPC raised rates. It is Worldwide Markets episode 696 for 30 September. I’m recording this midday Tuesday, and I am Simon Brown. Worldwide Markets, powered by Standard Bank Global Markets, Retail and Shyft, the global money app that puts travel, shopping, payments and investments in the palm of your hand. Enjoy the cheapest forex rates anytime, anywhere. Shyft, powered by Standard Bank. Thanks to Shyft, and thanks to Standard Bank for that.

I mentioned up front that the MPC raised rates by a quarter percent; prime is now 10.75%. That, I don’t think, is the big surprise. What we do now have, however, is rates rising globally. Yields on government debt the world over are moving higher, and it’s looking ugly. The Brazilian ten-year is at 14.1%. That is a terrifying number. We’ve seen the US ten-year now well above 5%. In fact, the US five-year has started to trade around 5%, and the US three-year is at 5.028%. Five is like the line in the sand, and it’s looking pretty ugly. Our own ten-year is also coming under some pressure, trading at 9.035%.

Is it a disaster? No, to be clear, it’s not the end of the world. Is it good? No, it is absolutely not good. Before the war our ten-year was just below 8%. We’re down from 11% last year, but if we zoom out, this is bad for us. We are running a primary budget surplus. What does that mean? We’ve spoken about it a lot. It means that before interest payments, our tax revenue covers our spending. But of course, the interest payments are out there. This isn’t about existing debt being repriced. What it means is that new debt, as we roll, gets priced at that higher level. And this is bad; there’s just nothing particularly good about it. I note I’m now seeing 8.940% up there, so there are differences in the numbers; it’s market timing, in essence. Call it 9%. We were at 8% back in February.

Trump, this is on you. You are messing up the world, make no mistake. And you have no idea how to make it end. That, unfortunately, is the problem.

So let’s get to some education stocks. Disclaimer right up front: I hold ADvTECH. I think we know the story around education, and I’m going to dig deep into that story, how compelling it is and its potential. But before we do, let’s look at the stocks.

Many of you know I’ve been doing some AI equity research, and some of the early ones I did were ADvTECH and Stadio. They were, I suppose I should just say, not very good, is the short answer. I’ve now redone them six months later, with results out. Stadio, they are saying, is immensely expensive, with a target price of R7 when it’s trading at more than double that. ADvTECH is also expensive, with a target price of R43 while trading north of R50. I did Stadio on Monday this week and ADvTECH on Monday last week. So both stocks are expensive, but let’s dig into the details: how expensive, and how bad that might actually be. Or perhaps it’s not so bad.

As I said, I hold one, and there’s a compelling story. There are two left, and both are good businesses: one at about 10 times EBITDA, that’s ADvTECH, the other at about 20 times EBITDA, that’s Stadio. We want to try to work out which price makes sense. Perhaps the key number up top: in the class of 2025, 345,000 matrics got bachelor passes. Public universities have 235,000 spaces. That’s 110,000 matrics with no space at a public university. To be clear, there are other options, but that’s the story.

Curro has delisted, which leaves just the two of them. Stadio just joined the indices: the All Share, the Small Cap, the Shariah All Share, and the value and growth indices. This was effective at the close on 21 September. It’s ranked number 99 in the All Share, way down the list. But what it meant is that it went from R12.82 at the beginning of September to R18.49 on 18 September, the Friday of the rebalance. On an average day it trades about R2.5 million. On that particular day it traded R387 million. In other words, going into the index saw massive volume and pushed the price to crazy levels. Is that a fair reflection? It’s come back a bit and settled in the R16s, but it’s still well up on where it started the month, up some 30-odd percent in September, a lot of that on the inclusion.

Let’s quickly look at some numbers, the valuations side by side. We’ve got forward EV/EBITDAs of just under 10 for ADvTECH and just under 20 for Stadio, which tells the picture, and we see that running through constantly: Stadio is about twice the price. Forward PEs are 17.6 on ADvTECH and 34 on Stadio. Dividend yields are 2.8% for ADvTECH and 1.3% for Stadio. We compare against the peer median, and we used a lot of global players because there’s not much local. These stocks are expensive: ADvTECH is 7% above the peer median, Stadio over 100%. There’s no real debt involved, no real debt worries here. On a purely mechanical pricing basis, they’re both a sell, but ADvTECH only just, whereas Stadio by a lot.

So how do we look at expensive? Because these are expensive. Stadio, as I said, is at 20 times EBITDA. The global peer range is around 4.6 to 9.6, and that 9.6 is ADvTECH. On multiples of revenue, Stadio’s EV is about 6.6 times revenue, ADvTECH’s around three times. Again, you see the trend coming through. Stadio does have slightly better margins, 30% versus 28.6%, and faster student growth, 13% versus 8%.

Price per student was a fun number to crunch. Both trade at a similar EV per enrolled student: about R234,000 for Stadio and about R253,000 for ADvTECH. There’s a difference, a little under 10%, but broadly the same. But ADvTECH earns far more per student: about R107,000 a year in schools and about R63,000 in tertiary, against R27,500 for Stadio distance learning. You get more per kid at ADvTECH, and that’s partly the blend. A lot of Stadio is distance learning, and distance learning is a fundamentally different business to a pupil in a school or someone at a university or college.

So perhaps this is the crux. Assuming Stadio continues to trade at around 20 times EBITDA in 2031, that’s about five years of 13% compound revenue growth. It just needs staggering numbers, absolutely staggering numbers. So what is the market paying for at this point? Stadio has grown from 32,000 students in December 2019 to 53,000 in December last year. HEPS has gone from 17 cents in financial year 2021 to 38 cents in financial year 2025. Their listing target of 56,000 students is being met this year; they got there at the half-year stage. It is capital-light: 86% of students are distance, and that’s 69% of revenue. Pretty much no debt, scarcity index demand, as I said, really helped, and management is targeting 80,000 students by 2030. University status, and I’m going to come back to it, is a big deal. And two big shareholders hold 45.5%, PSG and [PSC]. Is there something there? Remember the Curro delisting. But Curro was cheap; Stadio is not cheap.

ADvTECH has got lots of capacity. Revenue is up 17%, profit up 19%, margin 26.4%. They have been growing margin: the EBITDA margin has gone from 24% to 24.1%, 25%, 26.1% and 27.2% over the last five years. That’s averaging 80 basis points a year, which is big. They’ve got a long build pipeline. They’re building [Emirates] in Durban, they’ve got more colleges, Abbotts College, and they’re getting their own university status. They’ve got a lot coming in time, so they’re serious about it and they’ve got the capacity coming.

The problem is the peer median. There’s nothing on the JSE; well, there are just the two of them. When I’m doing the valuations, we use 30% discounted cash flow (DCF) and 70% peer median. There’s not enough on the JSE, so we have to go global, and that gets messy: because of other emerging markets, different regulations, all sorts of other points, and simply the discount rate. So is there an argument that says the global peer median perhaps just doesn’t crack it? Maybe that’s a good answer. Absolutely it is.

It also carries a bit of credit risk. The credit loss went to R77 million, up from R23 million a year ago. Yo, yo, yo. That is a lot, an absolute lot.

Back to the global peers: the US has Title IV exposure, so that’s harsh. We’ve got Laureate, an operator trading at 9.4 times; Stadio is still twice that. It puts ADvTECH in the door, but it still says Stadio is out. The EV/EBITDAs range from China at 3.3, Brazil at 4.1, 4.8 and 5.4, Peru at 9.4, and the US at 4.6 up to 9.2 in some cases, then ADvTECH at 9.6 and Stadio at 19.8. Man, I’m sounding like a broken record, but you get the point. It is expensive. Private equity has been buying some schools globally. I’m not sure we’re going to see that here, perhaps not in this space.

Let’s look at schools, which is ADvTECH, and I’m ignoring the ADvTECH recruitment business completely. The basic education budget is R358.5 billion, up 4% nominally. That’s R28,000 per student across 12.7 million learners. R28,000 is about 12% of what you pay at Crawford Sandton, our premium school here. The infrastructure grants go up to only R16.2 billion, which is absolutely tiny. Classes are running at about 30.8 learners; if you only take state schools, it’s 34.2. So the state schools are much fuller than the private schools; we know that already. And here’s an outcome: PIRLS 2021, which looks at grade four learners, found that 81% cannot read for meaning. 81%. These are standard two, kids who are ten-ish, who can’t read for meaning. Terrifying.

Independent schools in South Africa had about 4.8% of students in 2019 and now sit at about 5.5%. That’s across 2,325 schools and 738,000 students in 2023; I can’t find later data. In South Africa, private primary is about 5.8% of students and private secondary about 5.1%. Ghana is 28% and 15%, Nigeria 23% and 28%, Brazil 19% and 16%, Mexico 10% and 12%. We are way below. China is where we’d be closest, at 6.4% in primary, but secondary is 13.7%. Some, like Chile, are at 63.5% in primary and 63.2% in secondary. The world is running at 17% of primary students in private, against South Africa’s 5.8%, and 26% of secondary, where we have 5.1%. Now, we’ve got zero growth, consumers under pressure, 30% unemployment, and we just don’t have the capacity. There just is no capacity at all.

Every percentage point is about 134,000 students. If we were to move from 5.5% of students in private education to just 10%, which is sort of like the US, that’s [600,000] students. That is 17 times what ADvTECH currently does. We just can’t do it. To be clear, we’re not going to do it, because I don’t think we’ve got the capacity on the ground and I don’t think parents can afford it. ADvTECH has got some offshore. But it does tell you there is upside here, not to 10%, not in a hurry, maybe in 30 years or something.

Looking at pricing: for public schools, the state pays R28,000, and then the parent pays on top, anything between zero and R50,000 or R60,000, in some cases R100,000. Low-fee private, Spark Schools, is R36,000 to R46,000 for high school. The mid-market, which is Curro, is R65,000 to R108,000, depending on where. ADvTECH’s revenue per learner averages R107,000. The premium, Crawford College Sandton, is R211,900. Let’s do some quick time travel: my school, in my matric year, was R40 a year. R10 a term. Crawford is R50-something thousand a term. Yo, yo, yo. Then your unlisted schools, [Kearsney], Roedean, St John’s, are R230,000 to R280,000, and your boarding schools, Hilton, Michaelhouse, St Andrew’s, R400,000 to R450,000. So ADvTECH is sitting in the middle and upper-middle. It’s not at the top with Crawford, and even Crawford isn’t at the top-top; it’s at the bottom of the top. That’s where we’re seeing some growth, but as I said, we just don’t have the capacity.

Let’s look at tertiary. Both ADvTECH and Stadio are in tertiary, Stadio exclusively. As I said, last year 345,000 matrics got bachelor passes for 235,000 places. That leaves 110,000 students looking, and the gap is actually bigger, because there will be kids who couldn’t get in last year coming back this year, repeaters who failed and want to come back, and adults who also want a seat. So the 110,000 shortage is probably closer to 120,000, 130,000, 140,000, maybe 150,000. UJ, for example, got 450,000 applications for first year and has 11,200 seats. Nelson Mandela University got almost 300,000 applications for 8,500 seats, according to Daily Maverick. To be clear, one person might have applied to both of those universities, I get that. But we are chronically way behind on the number of seats.

On distance, which of course is where Stadio plays, the big story is UNISA. UNISA is 94% of distance enrolments, [350,000] students. It was almost 400,000 in 2020; the best number I could find was for 2023, at 350,000. It is coming down. In 2017 it was 344,000, so it’s back where it was almost a decade ago. There have been some concerns around UNISA, absolutely.

On fees: a UNISA full load, in other words full time but from home, costs R22,400, excluding books. Stadio is R27,500 to R28,900, so about 10% to 12% more. Public universities are anywhere between R58,000 and R111,000, depending on what you’re studying; a Stellenbosch BA is R58,000 and a UCT BCom R111,000. ADvTECH’s tertiary revenue per student is R63,000, and Stadio contact, so not distance, is R84,000. So ADvTECH and Stadio are in the zone. On distance learning they’re a little premium, but not completely out of the woods. I think that’s a very important point on tertiary.

The problem is the household budget, which is being absolutely squeezed. Education is important for yourself and particularly for your children. You’re looking at a household budget squeezed by high inflation, petrol and diesel prices, bond repayments going up; everything is expensive. Are you cutting DStv for Netflix? Maybe. Are you cutting the education budget? No, not exclusively, but you might downgrade. You might go from Crawford Sandton to a cheaper Crawford. Instead of going in person to Wits or UKZN, you might do Stadio distance. So I think there’s going to be cutting, but within the system, still staying private as far as possible.

On quality, these are perfectly fine businesses. ADvTECH and Stadio are quality businesses; we said that right up front, and there’s nothing wrong with them. But where does growth come from here? Stadio is targeting 80,000 students by 2030 and 100,000 longer term, which makes sense. ADvTECH is building: its Durban campus phase one in 2029 will be 8,000 students, and it’s picking up capacity at Rosebank International. They’re running fees ahead of inflation. Stadio added 18 new qualifications this year, including engineering for the first time.

And then there is university status. In October last year the Department of Higher Education gazetted higher education institutional types, bringing non-state institutions into the net, in a sense. It is, however, still pending regulations, and application windows are still pending. Every time I speak to the CEOs of either of these two, I ask about it, and it’s: look, we’re poking the minister, but there’s nothing we can do. This is a big one. When it happens, expect share prices to run.

Then, of course, the rest of Africa. ADvTECH has got Kenya and Botswana, largely acquisitions at this point, and Ghana as well, where they’ve got a Rosebank College. They’re going to start looking at expanding that. And maybe some corporate action, although I think Stadio is too expensive for that.

Risks: policy, a UNISA turnaround, fee caps, and free higher education. Namibia just did it; we tried it, it’s not going to happen, we don’t have it. Indebted consumers and indebted customers, and valuations that are crazy.

So, where is the smart bet in this world? In education, I think you’ve got to own at least one, and if you’re going to own one, it is ADvTECH. Is it a little bit pricey? Sure. Could you wait for a re-rating a bit cheaper? You totally could. Around R45 to R40 would be way better than where we are right now. We’ll look at some charts.

Stadio I really, really like, but Stadio is running expensive; there’s just no way to say otherwise. Stadio remains an expensive stock at this point. That said, does it have great potential? I think the answer is sure, it probably does, and maybe you want to pay up. I’m happy with my ADvTECH. I’ve held ADvTECH for about a decade or more, and it didn’t do much in the first many, many years. It’s been running quite nicely recently, and we’ve seen some consolidation. It has, as I said, gone a little bit crazy. R45 to R40 is a long way down, but it’s not impossible.

The Stadio chart is perhaps even a little crazier. Stadio was going nowhere, then it ran nice and hard. In an ideal world I would want Stadio closer to R10. I’m not sure you would get it, but if you do get it at R10, absolutely. And when we get that announcement from government, expect these stocks to run hard. Maybe that is the catalyst we should be looking for. Maybe we should be saying, you know what, let’s get in ahead of that announcement.

Worldwide Markets, powered by Standard Bank Global Markets, Retail and Shyft, the global money app that puts travel, shopping, payments and investments in the palm of your hand. Enjoy the cheapest forex rates anytime, anywhere. Shyft, powered by Standard Bank. Thanks to Standard Bank, thanks to Shyft.

I’m going to take these reports and put them into a download. Go to the YouTube channel if you’re watching, or if you’re listening on a podcatcher, go to justonelap.com/wwm, where you’ll find the show notes and can download the reports on ADvTECH and [Stadio]. In the meantime, we’ve got some events later in October. On 22 October, a Thursday, we’ve got a Power Hour. You can attend live in person at Standard Bank in Rosebank here in Johannesburg, or via webcast. We’re looking at actively managed ETFs; there are certainly a bunch of them coming. Are any of them better? Truthfully, I think some of them are. I think there are some really, really good actively managed ETFs and a bunch of not-so-good ones. Justonelap.com/events for more information and booking.

Let’s leave that there. My name is Simon, and we’ll be back again next week. Until then, look after yourself, and as always, if you can, look after somebody else as well. Cheers all.