Think Childcare Released Q1FY19 Trading Update; Stock Hugging The Trendline Support

  • May 28, 2019 AEST
  • Team Kalkine
Think Childcare Released Q1FY19 Trading Update; Stock Hugging The Trendline Support

Think Childcare Limited (ASX: TNK) is an ASX listed consumer discretionary company which aims to advance education and childcare in Australia. It strives to provide an environment for the children in which they can nurture their growth and development process.

On 27th May 2019, the company released its Q1FY19 trading update, highlighting its financial and operational performance.

The higher average fees aided the revenue to improve by 7% increase as compared to prior comparative period (pcp). There was an improvement in service performance, growing at 26%, up from 2.5 million to 3.2 million, as compared with pcp. Base wages increased by 2% versus pcp.

Operational metrics also saw an improvement on an overall basis with the daily average fees (6%) and days sold (40%) and the wages as a percentage of revenue increased by 1.6% versus pcp.

The company’s strategy is to offer the best care through a high-quality level of national curriculum, modern environments and delivered by a driven and engaged team. The company integrates environment as a third teacher which features architecturally designed spaces, natural materials etc. The company is following an innovative service delivery model to outgrow the family expectations.

The company also provided its CY19 guidance, EBITDA is projected at $13.8 million – $14.8 million with $118.8 million of revenue. The net profit after tax (NPAT) in CY19 is expected at $5.2 million. The divided policy remained unchanged.

FY18 annual results could be viewed here.

The company’s portfolio grew inorganically by 18% via acquisitions through incubator partners and is expected to own a total of 65 services as compared to 55 in 2018.

Technical Outlook

On the weekly chart, the current short-term trend of the stock is positive as the stock is trading above its trendline support. The trendline support in this case is formed by joining the 52-week low A$1.1 formed in November 2018 and the subsequent supports formed as seen in the chart.

More interestingly, around the 52-week low, the Relative Strength Indicator (RSI) was trading in an oversold zone. RSI moves with the stock price, when the prices rise, RSI in turn rise and vice versa. Think Childcare had fallen to the 52-week low and consequently RSI went below 30, entering the oversold zone. Oversold zone simply means the prices have fallen too far and a bounce or temporary reversal could occur.

Weekly chart of Think Childcare Limited (Source: Thomson Reuters)

And this is exactly what happened, after hitting the oversold zone, the prices reversed, and the entire short-term trend has now changed to positive. RSI is currently trading above 50, indicating the momentum to be on the positive side, and with trendline support, the uptrend is intact.

Currently, the stock is trading at A$1.8, and there is a strong resistance around A$1.8 – A$1.9. If this resistance is breached, then we may see more upside move else, a break below the trendline might initiate fresh selling.

Stock Performance

The company has a market capitalisation of A$108.25 million, and the stock had touched a 52-week high and low of A$1.95 and A$1.1 respectively. The stock is currently trading at A$ 1.810 (as at AEST: 1:20 PM, 28 May 2019), up by 1.117% as compared to its previous day’s close. It made a day’s high of A$1.820 and day’s low of A$1.800. The last one-year return of the stock is 6.6%, and the YTD return stands at 32.59%.


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