Ten Lifestyle Group – a loss-maker that is doing much better than expected
Just for a change I thought that the speculators amongst the Master Investor readers might like to have a punt on a current lossmaker, but one with some good upside potential.
Today I am profiling Ten Lifestyle Group (LON:TENG), a leading, travel and lifestyle concierge service, which specialises in helping wealthy individuals to enjoy the luxuries of life in an easy to book manner.
The service provides an exclusive service to its members, enabling them to discover, organise and enjoy travel, dining, live entertainment, in a manner that is easier, cheaper, and very much quicker than they could do for themselves.
This really is an excellent facility for the wealthy – and there are more of them today than ever before.
The population of high-net-worth individuals globally has risen from 10.0m in 2006 to 13.6m in 2016 and is expected to reach 18.7m by 2026.
The value of the luxury travel sector is expected to grow from $795bn in 2016 to $1,154bn in 2022.
In line it is expected that the premium dining and live entertainment markets will grow apace.
This really is a fast-growing market that is just waiting to be tapped – and Ten Lifestyle seems to have got it taped.
For its members, whether using desktop computers, telephones, mobiles, tablets or whatever, they can almost have the world at their fingertips. The Ten Platform is available to them 24 hours a day, seven days a week, 365 days a year.
It has a footprint operating in over 120 countries, with some 38 of them having active client programmes. The concierge Lifestyle team operate out of some 22 offices globally.
With over 800 employees, two thirds of them are outside of the UK.
Some 500 of its Lifestyle Managers are able to converse with their members in any one of over 26 different languages including: English, German, French, Arabic, Brazilian Portuguese, Mandarin, Japanese, Russian, Cantonese, French Canadian and Korean amongst many others.
This allows Ten Lifestyle to be able to service around 95% of the world’s high net worth individuals in a language in which they are fluent.
Most of the group’s revenue is derived from service fees that are paid by its corporate clients, under contracts typically of a multi-year duration of three years or more.
It focuses mainly on a corporate client model that includes private banks, retail banks, premium payment cards providers and luxury brands that provide Ten’s services to segments of their premium individual customers, who then in due course become Ten members.
The company generally does not take a margin on the goods and services it delivers to its members. By not doing so it provides a competitive pricing advantage over other providers, such as travel agents or ticket sellers, who almost always add their own margin.
The company notes that “Member satisfaction and the resulting impact of improving those members’ brand affinity for Ten’s corporate clients, drives Ten’s long-term success.”
The service includes: securing prime-time tables at the best restaurants; excellent extras at some 1,500 luxury hotels globally; the ability to secure ‘hot tickets’ for best seats at must-see sports, theatre, music and comedy events; pre-sale access and discounts for leading luxury products; tasting evenings, fashion showcases, art exhibition previews etc – the concierge service seems to be able to offer the HNWI’s the luxury they deserve and desire for their money – and Ten Lifestyle just builds up its millions of members and in due course its revenues.
Early last week the company announced a Trading Update for the year to end August, indicating that it should be reporting a lower than expected loss when reveals its results on 26 November.
Before the update brokers estimates were looking for a £45m revenue to produce a pre-tax loss of £6.7m for that last year. Then for the current year they foresee revenue for 2020 of £58m and a greatly slashed loss of just £1m.
However, the upside I mentioned at the start of this profile should be visible for the year to end August 2021 – with revenues leaping to around the £75m level, upon which pre-tax profits could push up to around £4m.
The company has some 80.65m shares in issue, of which the two founders, Alex Cheatle and Andrew Long, hold 11.74m (14.6%) and 4.86m (6.03%) respectively of the equity.
Other holders include: Lombard Odier (5.82%); Merian Global (4.99%); Quinto Corp (3.51%); Herald Investment (2.04%); Jupiter Asset (1.99%); and Baillie Gifford (1.76%).
We will obviously get some much more detailed and promising news when the annual results are published in just over two months, however, in the meantime the shares at just 120p do look to have some real running power as the service expands both globally and in numbers.
I note that brokers Peel Hunt last week jacked up their Target Price from 115p to 155p – I will go with that for my end 2020 figure.