STI Education Systems Q2 profit up 84% y/y to P498-M

STI Education Systems [STI 0.66, up 3.1%] [link] posted a Q2/24 net income of P498 million, up 84% y/y from its Q2/23 net income of P271 million. For the six months ended December 31, STI’s revenues increased 36% y/y to P1.96 billion, with a core net income increase of 136% to P506 million, and a net income attributable increase of 127% to P512 million. Enrollment in the company’s schools is up 33% for its owned schools and up 17% for its franchised schools. iAcademy is the only segment that suffered an enrollment decline, with a 7% y/y drop. Overall, total enrollment is up 27% to 119,543 students. STI said that its increased revenue and profitability was mainly from that increase in students, but was also partially due to a 5-10% tuition fee increase “across all levels”.

MB bottom-line: STI has been a stock that I’ve been following, as education and skill capacity upgrade programs are one of the pillars of my long-term middle-class growth thesis. My bullishness for STI peaked in 2021 when I felt like it was in the perfect position to push its education programs into the virtual space, and I was excited about the new levels of profitability that it could reach if it managed to somewhat divorce from the traditional face-to-face learning style. While STI never fully bought into the online shift, it did embrace an integrated approach and now many of its programs are a mixture of virtual and in-person lessons which give STI greater flexibility with its facilities and improves the efficiency of its overhead spending. The stock had a great 2023, rising 43% from P0.34/share in January to P0.49/share at the end of December, and it’s had an even better start to 2024, shooting up another 40% in just the first 6 weeks of trading. The stock is nowhere near where it was in 2017/18, but at P0.66/share, it’s worth more now than it was back just before the pandemic put all of its students on that dank indefinite vacation. 

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