Lifestyle and concierge services for the wealthy

As an introduction, Ten Lifestyle is a technology-enabled lifestyle and travel business providing a number of services for wealthy and high net worth individuals. These services include travel and concierge, dining, entertainment, and events.

It is worth remembering that a penny stock is one that trades for less than £1. So what’s happening with Ten Lifestyle’s shares currently? As I write, they’re trading for 87p. At this time last year, they were trading for 53p, which is a 64% increase over a 12-month period.

Ten Lifestyle’s performance is impressive considering many other larger established markets such as the FTSE 100 and FTSE 250 have struggled in recent months due to soaring inflation and rising interest rates.

The investment case

Starting with the bull case, Ten Lifestyle’s mantra is to cater to the wealthy and affluent people of the world. Generally speaking, despite economic volatility, the wealthy are largely unaffected and go about their day to day life spending as usual. I believe Ten Lifestyle is in an excellent position to capitalise on this.

Moving on, I believe Ten’s most recent update, a half-year report released in May covering the six months to February, supports my first point above. Net revenues climbed nearly 50% compared to the same period previously. In addition to this, it managed to service 43% more clients, which meant the number of clients on its books totalled a record 275,000.

Finally, I’m buoyed by Ten Lifestyle’s appetite for growth. It recognises that the number of high net worth people is on an upwards trajectory. With that in mind, it is spending heavily on technology and telecommunications to keep up with the times and enhance its offering. This can be seen in the £7.1m it spent in the six months to February 2023 alone on such infrastructure.

A penny stock I would buy

Despite trading as a penny stock, Ten Lifestyle’s valuation could be considered a bit high at present. It currently trades on a price-to-earnings ratio of just over 30. Any setbacks in performance could potentially lead to a share price fall.

Another thing to be wary of is that Ten Lifestyle’s business suffered badly during the pandemic. Although trading levels have returned to normal, I’m conscious that any similar type of event, where travel and such services aren’t possible, could dampen Ten Lifestyle’s performance.

Overall, I like the look of Ten Lifestyle as a penny stock for my holdings. I would be willing to add some shares when I have the cash to do so.

I believe Ten Lifestyle has great growth prospects ahead, and has performed well recently, which has helped me make my decision. Trading for less than 90p, I see very little risk, and potentially high reward in the future.

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European Metals Holding

Investing in early-stage miners can be a risky play. Exploring for minerals and developing mining projects can be fraught with expensive setbacks. And smaller operators have less financial headroom than the industry giants to cope with problems.

Yet the potential rewards of owning such shares can still make them attractive investments. European Metals Holding (LSE:EMH) — which owns the gigantic Cínovec lithium asset on the Czech-German border — is one such company on my radar today.

A string of positive project updates has helped lift the AIM-quoted miner’s share price in recent weeks. This includes an “outstanding” lithium extraction report in May that indicated recovery north of 95% using the flotation process. Studies show that Cínovec contains a mammoth 7.4 tonnes of the metal.

Lithium is a commodity for which demand is tipped to explode over the next decade. This is thanks to its essential role in electric vehicle (EV) manufacturing where it’s used to make batteries.

At the same time the development of new lithium projects is weak, suggesting a huge shortfall could be coming that supercharges prices. Industry giant Albemarle forecasts that lithium demand will exceed supply by 500,000 metric tons by 2030.

European Metals could be in one of the best seats to exploit this shortage. Not only does it own one of the continent’s most exciting lithium deposits, its strategic position in Central Europe puts it on the doorstep of several automotive, electronics and chemical industry giants.

Ten Lifestyle Group

As the global economy struggles for momentum a dark cloud continues to hang over consumer spending. Yet lifestyle and concierge business Ten Lifestyle Group (LSE:TENG) could be better placed to weather this bump than many other UK shares.

This is because the AIM business provides services to the high-net-worth customers of financial services providers and luxury brands. Spending among this demographic remains largely unaffected during downturns, so blue-chip companies will continue to demand the services Ten Lifestyle provides to keep them happy and loyal.

Indeed, latest trading numbers in May illustrated the robustness of its operations. Net revenues leapt 49% during the six months to February, while the number of active members on its books jumped 43% to a record 275,000.

Ten Lifestyle also advised that member activity had remained “robust” since the end of the period.

I think earnings at this penny stock could grow strongly over the long term. It has a terrific chance to steadily grow its member base as the number of wealthy individuals rises across the globe. The firm is investing heavily in technology and communications to capitalise on this opportunity too.

Spending in these areas rose to £7.1m between September and February, up 9%. It has a strong balance sheet with which to continue investing for growth, too.

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Chaarat Gold

I believe now could be a good time to buy gold stocks. And Chaarat Gold (LSE:CGH) is one that’s near the top of my shopping list.

The company operates the Kapan mine in Armenia, where production has been beating forecasts of late. It also owns promising exploration assets in Kyrgyzstan, one of which — the Kyzyltash gold project — has been described by finnCap as “large enough to underpin a midcap gold company or be part of a major’s portfolio.”

Gold prices remain robust around the $2,000 per ounce marker. And I think they could soon soar to fresh record highs as high inflation and weak economic data rattle market confidence.

This would give Chaarat’s profits a significant shot in the arm. I’d buy the miner even though currency fluctuations pose a risk to earnings.

Ten Lifestyle Group

Spending by high-net-worth people remains largely unchanged during economic downturns. This is why I believe Ten Lifestyle (LSE:TENG) — a company that offers concierge services to businesses and wealthy individuals — might be a perfect pick for these uncertain times.

The business is more than just a solid short-term pick, too. I think profits here could grow strongly over the coming decade as personal wealth levels balloon.

Analysts at Credit Suisse think the number of millionaires worldwide will soar to 87m over the next five years. That’s up from the 62.5m that were recorded at the end of 2021.

I am concerned by Ten Lifestyle’s elevated valuation. A forward price-to-earnings (P/E) ratio of 29.5 times could leave it vulnerable to a share price correction if trading news disappoints. But on balance I think this is a top penny stock to buy right now.

Zinnwald Lithium

The share prices of lithium stocks could go through the roof over the next decade. Being a key material in car batteries, demand for the commodity is tipped to soar as electric vehicle sales take off.

Lithium miner Albemarle recently raised its demand forecast to 3.7m tonnes by 2030. At the same time it predicted supply of just 2.9m tonnes, suggesting a big deficit that could supercharge prices.

I think Zinnwald Lithium (LSE:ZNWD) might prove a top stock to exploit this opportunity. The business is developing the Zinnwald project in Eastern Germany, an asset located in the heart of the continent’s carbuilding and chemicals belt.

What’s more, a €2bn commodities fund to be established by the German government could provide significant support. Bloomberg reports that policymakers will provide financial aid to miners of key materials like lithium to reduce reliance on China.

There is still a long way to go until first production at Zinnwald. And any development setbacks there could have a significant impact on future earnings. But all things considered, I find this penny stock highly attractive right now.

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That said, I am looking to add some smaller companies to my portfolio, albeit with modest stakes. In particular, I’m looking to take positions in firms that have market capitalisations below £100m and share prices under 100p.

One that fits the bill is AIM-listed lifestyle and concierge business Ten Lifestyle Group (LSE:TENG), which has a market cap just shy of £76m and a share price below 92p as I write. Here’s why I’d invest in this penny stock today.

A unique growth engine

Ten Lifestyle Group harnesses technology to provide services for wealthy customers. Its offering spans the lifestyle, travel, dining, entertainment, and retail sectors. The business model has a solid track record, with the company boasting a 25-year trading history.

The group has strategic partnerships with major banks including HSBC, Morgan Stanley, and Royal Bank of Canada. It generates revenue from service fees contained in multi-year contracts with these corporate clients.

Speaking of revenue, the latest numbers are encouraging. In 2022, the company delivered record net revenue of £46.8m — that’s a 35% increase on the 2021 figure, and ahead of the firm’s pre-Covid levels. In addition, adjusted EBITDA also climbed 11% to hit £4.9m.

Ten Lifestyle Group continues to make strides with regard to creating a competitive advantage over its rivals. Investment in technology, content, and communications rose 18% to £13.6m. The firm’s digital platform now supports 18 languages and 39 currencies. It’s available to members in over 100 countries.

Perhaps the most promising development is evidence that the company is successfully capitalising on pent-up demand for global travel and lifestyle services as the world emerges from the pandemic. Active members (defined as members who have used the company’s service at least once in the past 12 months) are now at a record high, after increasing 36% in the last financial year.

Challenges

Despite some positive numbers, investing in this penny stock isn’t risk-free. Although its losses have diminished in size, the firm has failed to make a profit over the last four financial years. While the trajectory is promising, I’d like to see the company become profitable sooner rather than later.

In addition, Ten Lifestyle Group has faced difficulties arising from the war in Ukraine. The company was forced to close its Moscow office in March 2022, leading to a loss of business and one-off disposal costs of £519k. Further geopolitical tension and the elevated possibility of sanctions on other countries remains a concern.

Finally, given the group’s reliance on corporate client income, it is indirectly exposed to the performance of its key customers. In light of the current crisis engulfing many banking stocks, client expenditure on lifestyle, travel, and entertainment services may come under greater scrutiny when the time comes for contract renewals.

Why I’d buy this stock

Although there are risks, this penny stock looks like an attractive investment to me.

It’s a market leader in a sector that has significant growth potential, and the company’s digital strength makes the offering highly scalable.

If I had some spare cash, I’d invest in Ten Lifestyle Group shares today.

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An award-winning penny stock

If there was a naughty and nice list for stocks over the past year, Zephyr Energy (LSE: ZPHR) would be right at the top of that nice list. At this time last year, a share in this company was trading at 0.82p. Today it is worth 6.85p – representing an award-winning 755% appreciation in share price. Not bad for a penny stock. The winner of the Best Performing Share Award at the prestigious AIM Awards this year is a growing oil company with operations in the US Rocky Mountains. The longer-term risk for Zephyr is the obvious push to phase out fossil fuels, but for the moment, demand remains high. The combination of high demand, recent successes in drilling activities, a very competent and experienced management team, and the 6p price tag on this stock make it a no-brainer for me.

A potential dark horse going into 2022

Travel and lifestyle bookings company Ten Lifestyle Group (LSE: TENG) is next on my list. In the wake of the Covid-19 pandemic, the company has naturally taken quite the beating. Losses have been the order of the day over the past two years but the stock price is yet to reflect this. In fact, this penny stock is up 16% year to date. Now, am I expecting this stock to make me wealthy? Certainly not. But what I’m willing to gamble on is a return to some semblance of normalcy in 2022. Already in September of this year, the company announced that bookings were back to pre-pandemic levels. Provided restrictions continue to get lifted, there could be nice returns here in 2022.

Cheap tech 

Idox (LSE: IDOX) is probably my favourite addition to this list. You simply don’t get tech companies that cost 69p. My colleague James Reynolds, recently wrote about how this penny stock rose roughly 20% in the past year. Idox sells software solutions, mainly to governments but also in the private sector. With a growing base of recurring and non-recurring customers, Idox is likely to continue on its upward trajectory in the future. What I would like to see from Idox in the coming year is growth of its markets at home and abroad. Right now Idox has some presence in Egypt, the Bahamas, and Saudi Arabia. Razer thin margins threaten to impair the growth outlook of the business, but if it can continue to grow in 2022, the sky is the limit for the price of this stock.

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That is true but the trick is to know what you are looking for and seek stocks with the potential to grow and the Alternative Investment Market (AIM) could be the place to find them. Often compared to the Wild West, The London Stock Exchange’s junior market for growth companies, is not the place to buy without due diligence.

Its risks are real. Less than a quarter of the original companies listed there are still trading. However, if you examine company fundamentals, debt, profit and management, among some cowboys, you may find yourself a cash cow.

High altitude

Altitude Group (LSE:ALT) provides technology solutions to the  promotional merchandise, marketing and print industries in the UK/North America.

The share price has mostly been on an upward trajectory this year. However, in May, it posted a pre-tax loss of £2.8m compared with a £125k profit the year before. It put 2018 losses down to increased operating costs in the US. But it has a low debt ratio of 0.25 and a strategic acquisition may be just what the company needs to propel its earnings.

Altitude purchased the Advertising Industry Mastermind Group in January for a total consideration of $5m. The purchase was part-funded by a January share placing that raised £9m (gross) and after acquisition, the subsidiary’s trading name changed to AIM Smarter. 

The buy gave Altitude access to approximately 8% of the promotional products sector in its lucrative $23bn US market.

In the first 4.5 months of 2019, over 400 members contributed sales orders worth over $31m. This increased the average from $1m per week in March to over $2m per week in April (2018 averaged $383k per week) and AIM Smarter membership numbers grew by an additional 10%.

Last week, Altitude founder Martin Valery sold £2m shares but continues to retain 14.8% of the company. This understandably caused the share price to fall.

I am still inclined to see this share favourably because the company has confirmed 51 members upgraded to one of its new tiered packages between April and May and it has negotiated fees on sales placed with 149 affiliate suppliers.

Analysts forecast sales rising from £6.6m in 2018 to £19.8m this year and to £35.2m in 2020. But this is all purely speculative until Altitude confirms the revenues it’s receiving, so I see it as one for the watch list. 

Wealth begets wealth

The Ten Lifestyle Group (LSE:TENG) share price has been steadily rising this year.

Ten sells worldwide concierge services to banks and wealthy individuals. Members use its platform to pre-book or purchase items such as restaurant reservations, holidays, tickets or treatments.

In May and June it secured new contracts with Revolut, China Merchants Bank and a global technology, media and telecom brand. The company expects these contracts to grow to be worth more than £2m each in the coming years.

Ten is not currently profitable and its share price is way off previous highs. Plus it has a book value worth only 23% of its current share price. Shareholders who purchased shares 18 months ago will still be nursing losses. Red flags? Maybe, but it has little debt, with a ratio of 0.27 and recent contract wins make me think this company has room for continued share price growth. Again, I am putting it on my watch list.

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Last year was the company’s first as a public business. Unfortunately, since coming to the market the group’s performance has been dismal. After jumping to a high of around 160p, the shares have since slumped to just 90p.

So what’s gone wrong? Well, it seems to me that the company has failed to live up to the market’s growth expectations. Figures for the six months to the end of February disappointed, with the firm reporting a loss before interest and tax of £3.8m, against the prior year’s performance of -£0.3m. Revenues increased 5% to £18.2m.

However, it seems to me as if the market is overlooking the firm’s potential. 

Growth mode 

Ten is still in growth mode and the IPO has allowed it to accelerate expansion plans. These efforts seem to be paying off with HSBC and Visa both signing up as clients in the first half.

I believe that if the company can prove to investors that it’s heading in the right direction with its full-year numbers, the shares could stage a dramatic recovery. The good news is the firm looks on track to report a robust set of figures for the current financial year. Today, management announced that it expects net revenues for the fiscal year to be in line with market expectations. 

What does the City think? Well, analysts are forecasting revenue growth of just 5.7% for 2018, which is hardly show-stopping. But in 2019, Ten’s growth efforts are expected to pay off. Analysts believe this is the year the company will finally report a net profit (only £400,000, but that’s a start). 

With a high fixed cost base, I believe Ten’s growth should accelerate once the enterprise reaches its breakeven point. And with demand for custom experiences only growing, it’s my view that this company has what it takes to outperform in the years ahead.

Bigger fish 

If Ten is too small for your portfolio, I’m equally positive on the outlook for Tui (LSE: TUI).

Tui is the biggest fish in the travel business pond. The company’s market capitalisation is more than 100 times the size of Ten. It still offers value though as the shares today are changing hands for just 12.2 times forward earnings. In my opinion, this multiple isn’t too demanding for one of the world’s largest integrated travel businesses. On top of the attractive valuation, the stock also supports a dividend yield of 4.9%, which is covered 1.7 times by earnings per share.

As my Foolish colleague Royston Wild recently noted, shares in Tui have come under pressure since its Q3 results, when it announced a decline in profits. However, like Royston, I believe this selling is overdone as, in the long-term, Tui is well positioned to profit from the ever-growing demand for package holidays and holiday experiences. As Royston pointed out, Tui’s bookings for summer 2018 are up 4% year-on-year, a positive performance and one that I believe showcases the group’s strengths, as opposed to profits, which can be volatile.

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However, there are still a number of shares which appear to offer appealing rewards given their level of risk. With that in mind, here’s one dividend share I’d buy, as well as one declining stock that could be a company to avoid at the present time.

Improving outlook

While the retail sector has experienced a difficult recent past, its prospects seem to be improving. B&Q owner Kingfisher (LSE: KGF) could enjoy a strong return to growth after a mixed period, with the company’s bottom line forecast to rise by 17%-18% per annum over the next two financial years.

One reason for this is the improving outlook for the UK economy. Specifically, UK consumers are expected to see their disposable incomes rise in real terms, since inflation has now fallen below wage growth for the first time in over a year. This could lead to improving consumer confidence and may mean that spending on non-essential items increases at a fast pace.

Of course, Kingfisher is an internationally-diversified business. The UK, though, continues to make up a sizeable proportion of its revenue, while the chance of improving operational performance elsewhere under its current strategy could lead to stronger overall profitability.

A rising bottom line means that dividend growth could be brisk. Kingfisher is expected to post a rise in dividends per share of 23% during the next two years. This puts it on a forward yield of 4.3% and suggests that it may offer strong income prospects for the long term.

Disappointing performance

In contrast, the risk/reward ratio for technology-enabled lifestyle and travel platform company Ten Lifestyle (LSE: TENG) appears to be less attractive. It reported a disappointing trading update on Monday, with it stating that net revenue for the 2018 and 2019 financial years is now forecast to be £6m and £10m below previous expectations.

This is due to the length of time between a contract tender, win and commencement of revenue being longer than anticipated. The impact of this on the company’s EBITA (earnings before interest, tax and amortisation) is due to be negative, with its profitability now expected to be below expectations in 2018 and 2019.

While Ten Lifestyle is making progress with operational improvements and has been able to win new contracts of late, its shares have fallen by over 25% on the profit warning. As such, its stock price could be highly volatile over the medium term. Coupled with its lower-than-expected revenue and profit outlook, it appears to be a stock to avoid at the present time.

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