The Australian Federal election result wasn't a great outcome for child-care centre operator G8 Education as the prospect of a weak federal government is likely to impede the passage of favourable child-care legislation. However, in the long term, the company's prospects are brighter as demand and government funding for early childhood Education and care services are likely to grow. Both the Liberal and Labor parties propose increasing ECEC funding, but the method, magnitude and timing remain uncertain.

At AUD 3.92, the market price implies a fiscal 2016 price/earnings Ratio of 15 times, based on a December financial year-end, and a PE/EPS growth ratio of 1.1 times. The dividend yield is 6.5%, or 9.0% including franking credits, and assumes a 95% payout ratio. In comparison, the ASX 200 index trades on a forward P/E ratio of 16 times and dividend yield of 4.6%. 

Analyst: Gareth James

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