Cedergrenska - Where the teachers can thrive

One of Sweden’s leading independent schools 14% sales and 10% EBITA CAGR ‘19/’20-‘22/’23e DCF scenarios yield a fair value range of SEK 43-76 Targets geographical clusters in growing municipalities A few players have established themselves behind the two largest independent school companies AcadeMedia and Engelska Skolan. Cedergrenska is one of them, thanks to rapid expansion in the last couple of years, with ~6,000 students spread between 26 schools, making it the eighth largest independent school in Sweden. The company targets geographical clusters where the schools collaborate and share resources, and has given utmost importance to the role of the teacher. Cedergrenska offers education from preschool up to higher vocational education, but the lion’s share of revenue stems from Compulsory- and Upper Secondary schools.

For example, it operates the largest independent Upper Secondary school with Tibble Gymansium Campus Täby, which has 1,700 students. The company targets annual sales growth of 15% (7% organic) and an EBITA margin exceeding 8%. Aiming to be a part of the ongoing market consolidation Cedergrenska has been active in M&A in recent years.

During the last five years the revenue CAGR has been 32%, whereas the organic revenue CAGR has been 10%. Even though some larger independent actors have established themselves in the market, there are still many small independent companies that only operate one or two schools. Therefore, we think Cedergrenska has a solid position to continue its M&A driven agenda on top of the 7% organic growth it targets.

We forecast organic growth of 5. 1% on average over the coming four years with an EBITA margin of 8. 1%.

For the period ‘19/’20-‘22/’23e we forecast sales and EBITA CAGR’s of 14% and 10%, respectively. Successful M&A could create value To arrive at our fair valuation range of SEK 43-76, we have used an equal weighted average of three DCF scenarios: 1) assuming ~5% organic growth and an 8% EBITA margin, 2.