G8 Education: Large Childcare Operator at Depressed Valuation

Peter Kennan of Black Crane Capital presented his investment thesis on G8 Education (Australia: GEM) at Asian Investing Summit 2026.

Thesis summary:

G8 Education is Australia’s largest listed childcare provider, operating ~400 centres with ~36,000 children enrolled across all major states and generating revenue of ~A$950 million. The Australian childcare model is government-supported, with roughly half of fees paid through a cost-share scheme (CCS) that enjoys bipartisan backing. Peter characterises the business as a network of local childcare monopolies within a subsidised system — individual centres are geographically captive assets whose economics are driven almost entirely by utilisation, since pricing is stabilised by regulation and subsidy.

The investment opportunity reflects a cyclical earnings compression, not a structural decline. Over the past twelve to twenty-four months, occupancy has fallen from ~70% to the mid-60s, with spot levels near 54%. Operating EBIT has declined from ~A$115 million in CY24 to ~A$93 million in CY25, and operating NPAT from A$72.4 million to A$59 million. The weakness stems from cost-of-living pressure, work-from-home behaviour, declining birth rates, and new supply that has outpaced demand. Net supply growth is now decelerating, from a peak of 3.9% in Q4 CY24 to 2.7% in Q4 CY25.

Peter argues the structural demand drivers remain intact. Long-term female workforce participation continues to rise, dual-income households face ongoing economic pressure, and government subsidies are firmly embedded. The business is fixed-cost, so a return to even partial utilisation recovery would translate directly into operating leverage. The balance sheet carries minimal financial leverage, although long-term operating leases limit flexibility.

Risks include a more permanent WFH-driven shift in demand, persistently low birth rates, and pockets of structurally impaired centres whose catchment demographics have deteriorated. Regulatory pressure following child-safety incidents is pushing the industry toward video and AI-based monitoring, an area where G8 is working with Intelligent Monitoring Group on rollout.

The shares recently traded at A$0.23, down from A$0.70–0.80 earlier this year (-66.67% YTD), implying a market cap of ~A$177 million. Annualising H2 CY25 EBIT puts the stock at 3–4x depressed earnings, a multiple that discounts further deterioration and permanent impairment. Peter views stabilisation alone as sufficient to earn an acceptable return, with a partial cyclical rebound over a two- to three-year horizon providing the upside.

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About the instructor:

Peter Kennan is the founder of Black Crane Capital a catalyst/activist, deep value investment manager. Black Crane has a strong track record of creating value by actively engaging with under valued listed companies including the successful restructuring turnarounds of Elders, Emeco and MMA Offshore. Prior to founding Black Crane in 2009, Peter was a leading corporate financier with UBS Asia Pacific where he was Head of Asian Industrials Group, a team covering energy, infrastructure, resources, consumer/retail and general industrial companies. Prior to that, Peter was Head of Telecoms and Media for UBS Australia. Before UBS, Peter spent seven years with BP in a variety of engineering and commercial roles.