Embark Early Education Ltd

The fund managers believe Embark Early Education Ltd represents a significantly undervalued opportunity in the childcare sector, underpinned by strong macroeconomic tailwinds and a high-quality management team. In their opinion, the company has undergone a successful strategic turnaround, marked by the exit from its underperforming New Zealand operations and a renewed focus on the Australian market. Embark has returned to profitability and delivered impressive financial performance in FY23, with early CY24 indicators also pointing to robust growth. The fund managers highlight the company’s disciplined acquisition strategy, led by CEO Chris Scott, who has consistently adhered to a strict valuation threshold of 4x EBITDA when acquiring new centres. A recent acquisition of nine centres, expected to lift centre EBITDA by ~37%, along with access to a $20 million debt facility, positions Embark for further earnings accretion and operational expansion. In their view, Embark’s superior occupancy rates—averaging 82% in FY23 and peaking at over 86%—demonstrate management’s operational efficiency, which distinguishes the business from other roll-ups in the sector. Structural growth drivers such as increased government subsidies, rising female workforce participation, and population growth further reinforce the long-term outlook. The fund managers consider Embark an attractive investment, combining compelling valuation, strong execution, and powerful macro support.