2011 Media Releases

Deutsche Bank (XETRA: DBKGn.DE / NYSE: DB) has initiated coverage of childcare services provider G8 Education Limited (ASX: GEM) with a Buy recommendation.

G8 Education owns and operates a portfolio of 146 childcare centres in Australia and Singapore. Research analyst Dominic Rose said, “The demand outlook for childcare services appears favourable, underpinned by a constructive macro backdrop and industry tailwinds.

“We regard childcare centres as good cash flow businesses with relatively low working capital and capital expenditure requirements.”

G8 Education has expanded its portfolio of childcare centres through strategic acquisitions buying five separate childcare groups over the past 14 months. Rose said, “Management has adopted a disciplined acquisition model aimed at opportunistically consolidating the fragmented childcare industry with a strong focus on delivering increased returns for shareholders.”

Deutsche Bank’s positive recommendation is based on macro drivers such as economic conditions where historically low unemployment levels support demand for long day childcare services, government policy, demographics and parental demand for educational development combined with micro drivers such as revenue and cost.

“Centre revenue is largely a function of licensed capacity, services provided, fees charged and occupancy levels with G8 Education targeting each of these to drive improved top-line performance.

“G8 Education management operates a differentiated and disciplined model and principally looks to add value to acquired centres by applying operational expertise to lift occupancy and margins,” Rose said.

Key downside risks identified by the analysts include a downturn in macro conditions which may reduce demand, sensitivity to acquisition pricing and integration, changes to government policy, employee wage inflation and legal disputes.

For further information, please contact:

Deutsche Bank AG    
Name: Camilla Herring   
Phone: +61 (0) 2 8258 2731
E-mail: camilla.herring@db.com