The international student crackdown will get worse before it gets better and these 3 stocks could lose

Nick Sundich Nick Sundich, July 11, 2024

Just when companies relying in international students as customers thought things were settling into a ‘new normal’, the international student crackdown is spooking investors.

It is not just speculation, or even ‘tough talk’ that is not being followed through. Measures are being taken and companies are feeling the pinch. With Australia’s major political parties in bipartisan agreement that numbers will be cut, things are unlikely to get better anytime soon. And international students are no small market.

 

How many international students are there in Australia?

According to the Australian Government’s Department of Education, there were over 700,000 of them during the March quarter of 2024. Of these over 150,000 came from China while a further 116,000 came from India.

5 years ago, there were over 756,000 of them. 212,001 came from China and 115,107 came from India. This was 9% growth year on year and a near-tripling of the market since 2005. During the pandemic, the market fell. The headline numbers show a 25% decline, to 572,274 for CY21, although the reality is probably a lot worse. This is a headcount of all who had a valid student visa during that time, whether or not they actually studied physically in Australia. While we won’t try and guess a proportion, it is hard imagine all of those 572,274 did.

 

Australia is discouraging migrants

The closure of borders and slow pace to reopen them meant that numbers dried up and were slow to recover. You can see that Chinese student numbers in 2024 are still well behind pre-COVID levels. With governments keen for a scapegoat for the cost of living crisis, particularly high rents, it is easy to turn to international students. Measures the Australian government has taken include a tightening of visa regulations and a no-notice increase in the non-refundable visa fee from $710 to $1,600, a figure that is 10x ahead of Canada and over 5x ahead of New Zealand. There has also been talk of a cap on foreign enrolments, but as to how or when it will be enforced remains to be seen.

 

3 stocks that might be impacted by the international student crackdown

 

1. AuMake (ASX:AUK)

Penny stock AuMake (ASX:AUK) engages in commerce with Chinese consumers, including through retail stores that cater to Chinese tourists.

These stores have been operating throughout the pandemic, but the business has always been waiting for Chinese students and tourists to return for its stores to perform better. It has sought to diversify its offerings online. Most recently, in June 2024, it unveiled Streamii, an AI-powered digital marketing platform that can integrate on Chinese platforms like WeChat, Douyin and Xiaohongshu.

 

2. NextEd (ASX:NXD)

Once known as RedHill Education, this company provides English and vocational education courses.

In its most recent trading update, in May 2024, the company reported an increase in student enrolments, even in spite of a sharp decline in visa approvals. The company told investors it highlighted it had a strong competitive position driven by a strong reputation and tailored course offerings in high demand skill areas. It is pivoting from English language courses and is moving to courses like aged care and hospitality, where students may work in during or after graduation. 

But shares are down over 80% in the last 12 months. Evidently investors don’t believe ‘build it and they will come’ when you have to pay so much just to come to Australia.

 

3. GPT Group (ASX:GPT)

GPT is one of the most noteworthy REITs on the ASX with a diversified portfolio. In October 2023, it diversified into student accomodation, taking management of a $1bn portfolio that is owned by Canadian property investor QuadReal.

It is a 5,000 bed portfolio that includes Unilodge facilities in Melbourne, Brisbane, Adelaide and Auckland. Just prior to the international student crackdown, it was lucrative to be in this space because build to rent housing in all its forms was on the rise. The Chinese government edict that students return to campuses in early 2023 did plenty of favours. And Australia has a more modest proportion of purpose-built student beds compared with Britain and the US. But it could be a case of poor timing if the international student crackdown results in a drop in student numbers.

 

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