Ann: Prospectus, page-2

Very interesting business combinations in education and IT that appear to be well managed.

Numbers in relation to high net cash and growing margins are metrics that are rare qualities.

The major issue appears the possibility of black swan events in the IT division. One situation is the 27m in revenue contracted for the next 2 years that is unlikely to be matched after that. That risk is also inherent in other contracts where revenue is highly concentrated or a contract could be voided or not extended. Perception of this business model, probably limits the PE due to risk factors to current levels.

Also another factor to consider is that funding for certificate courses has grown at the expense of diploma and higher qualification courses. I'd think CGL's next acquisition will be a NSW or QLD RTO that does certificate courses to capitalise on changes in funding. You've seen VET, ACO, ASH look to this strategy.

23m in cash for acquisitions, and using 1 x EBITDA / debt ratio that could give them about 35m for acqusitions. At around an 8 PE for acquisitions that would earn about 4m which could increase NPAT by 50%.

If they can achieve that, while not having any black swan events in their IT dealings, 2016 FY could be the sweet spot and come up with a forward PE of around 9.