April 21, 2024

A look at online education through the eyes of STADIO



STADIO Holdings is an investment company in Private Higher Education, supporting three prestigious institutions which collectively offer over 90 accredited programmes, from Higher Certificates to Masters Degrees and Doctorates, through Contact, Distance and Blended Learning, to over 30 000 students. The three institutions in the STADIO Group include STADIO, Millpark, and Afda.

STADIO currently boasts 38 262 students. How does it compare? Figure 1 lists the top 10 traditional universities in South Africa. With over 38 000 students, STADIO is among the top five universities in the country, if compared to traditional universities. Now here is the real kicker - UP is the largest university in South Africa with roughly 48 500 students, but, when compared to Unisa, its an infant. 

UNISA, South Africas largest online university, has 400 000 students. That is not a typo. 400 000 students. What does this mean? It means there is a massive opportunity to challenge Unisa and gain some market share. Will the market share go to online institutions like STADIO, or will traditional universities adapt and transform their infrastructure to the online space? Time will tell. 

How big can STADIO become? At an 8% growth rate in students, STADIO will have 56 000 students by 2026. This is their aim for the medium term: grow as a company and gain market share from Unisa. If they can achieve this, revenue will keep increasing, and with it, the share price of the company. 


Technical Analysis

Market structure [refer to figure 2]: The share price trended downward since its listing in 2017 to middle 2020. Of course, online learning became a household name since Covid19 hit, and therefore it should come to no surprise that the share price has been in an upward trend ever since. 

Current levels [Refer to figure 3]STADIOs share price is currently at its short-term support level. Looking at the past year, there has been two significant surges in price: March 2021, from 230c to 330c, and March 2022, from 330c to 425c. It has since cooled down back to its current level at around 320c. 

On the daily time frame, as evident in figure 3, the RSI is converging to oversold territory at around the 30-35 levels. If the current support level does not hold and we trend lower, the next entry point would be around 275c.



Income statement:  Revenue equals price times quantity. In our opinion, the price of online learning will continue to trend downward, due to accessibility of education, scaling, and increased competition in the space. BUT there is no doubt that the number of students will increase, as mass adoption of online learning and hybrid models takes place. 

So, how is STADIO fairing in terms of student growth? As indicated in figure 4, STADIO is growing fast. The biggest jump in client base was between 2017 and 2018 when roughly 17 000 new students registered. With a higher number of students, revenue and all other earnings figures increased with it. 

Balance sheet and cash flow statement as expected. Not much long-term debt which is always a positive sign. STADIO has sufficient liquidity, solvency and coverage ratios. The P/E, P/S, and P/CF ratios all exceed that of the industry average, which might be a concern, but when looking at the bigger picture, it should not be a big deal. 


Bull case

Industry potential: Online learning is extremely scalable. The total addressable market is massive, especially if we consider what UNISA could achieve with a relatively sub-par system. STADIO plans its education infrastructure to be 80% online and 20% in-person learning. With 80% online learning, classrooms size has no limit, which means that the company will not be restricted to physical infrastructure as in the case of traditional universities.

Main competition: Unisa is renowned for delivering sub-par services to its users. The content and admin of Unisa are not up to scratch, which means there is a massive opportunity to gain market share.

Growth: STADIOs consistent growth, both in members and revenue, is looking strong. If STADIO continues with its current trend, it will have more than 50 000 registered students by 2025.

Management: STADIO has an extremely strong management team. CEO Christian Vorster is a highly experienced businessman with over 20 years of experience in the higher education sector. Vorster was appointed as a co-chief operating officer of STADIO Holdings in August 2019, and chief executive officer of STADIO Holdings, effective 1 April 2020. 

Technical analysis: The share price is at its medium-term support level, corresponding with oversold RSI levels. This signals a potential buy opportunity.


Bear case

Competition: The online learning space has exploded since the covid pandemic started. In addition to increased competition in South Africa, STADIO faces competition from two other sources: International online competitors, and free education via many online and social media platforms.

Recent experience: In a recent survey, it was clear that students currently studying at STADIO have raised some concerns regarding the quality of material and teachings. This, of course, is never what you want to hear as an investor. The stats and statements may look good, but if the product doesnt impress, generic growth will be halted. It is still early days, so we will give the benefit of the doubt.


Overall Opinion:

FinMeUp is taking a small position in STADIO at 322c per share. We will monitor the companys progress and keep a close eye on the next set of financials.  

Just a friendly reminder - This is not financial advice. Always do your own research before taking a position. Content is for informational and educational purposes only.

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