Summary
Few of you have probably heard or read about Edenred – in this article, I deconstruct this company and show why I view this €10B market cap business as appealing.
Edenred was known as Accor Services – it’s a French company providing prepaid corporate services, making it consumer discretionary.
At current valuations, there’s a long-term upside to Edenred, and you could conceivably make 20% in the medium to long term here.
Looking for more investing ideas like this one? Get them exclusively at iREIT on Alpha. Learn More »
Author’s note: This is an article originally posted on iREIT on Alpha back on February 2nd of 2022. ljubaphoto/E+ via Getty Images In this article, I’m going to write about Edenred SA ( OTCPK:EDNMY ). The company is the original inventor of Ticket Restaurant, created all the way back in 1962. We’ll take a look at the company on a high level, what makes it tick, how it makes superior returns, and why it could end up making you money in the long term.
The company was inspired by the Luncheon Voucher, a concept that was introduced in the UK. The French government recognized the voucher as an employee benefit, and from that point, it’s been substantial growth over time.
Let’s look at what Edenred offers you. Edenred logo (Edenred Corporate) Edenred – A deep-dive
The company was known until Accor Services until it became Edenred after the financial crisis in 2010 and was listed on the NYSE Euronext Paris in conjunction with this. It shifted to a digital approach in 2014 and launched the Ticker Restaurant card in 2014, and today over 85% of company products are digital. Edenred At a Glance (Edenred IR) Edenred, as mentioned, is an employee benefit/ticket restaurant business. It’s also known as a corporate service provider. It offers corporations prepaid employee benefits that in most geographies come with appealing tax benefits for the company – i.e. they are cheaper for the employer than salary or other benefits, and attractive for the employee because it is cheaper than paying for your meal privately. A win-win situation, at least in theory.
Edenred has a safe credit with BBB+/A2 and comes with a somewhat meager yield of 1.5-2%.
On a very high level, Edenred is the leading corporate service provider in the world, in its field, with a global presence in 45 countries. The company manages around €30B of issue volume, and almost all of this is transacted through card, phone, or the web.
On an operational level, the biggest revenue contributor is the company’s Employee Benefits business, which pertains to the aforementioned vouchers/cards for expenses on food and quality of life items. This isn’t just limited to food but can be used for services that are considered employee benefits, such as cultural activities, staple goods, and child care (in some geographies).
This is a unique business model , involving revenue streams from: client fees (corporations, offering employee benefits)
merchant fees (restaurants, supermarkets, etc with affiliations to Edenred)
breakage (damaged paper vouchers, etc)
These sources make up the take-up rate. Additionally, the business earns interest on the float, which corresponds to service vouchers in circulation less trade receivables.
For those of you more interested in an actual overview, we can find a chart explanation of the business model in the company’s official filings. Edenred Business Model (Edenred Filings) Some of you might ask “does this really work?”.
Yes, it does. Edenred is an impressively growing business on the back of its geographical expansion, including five new countries added to the mix, with M&As from different service providers locally, such as Embratec in Brazil, Nets Prepaid in France, and others. Additionally, the company’s services can be considered appealing viewing the company’s client wins, as well as its market share.
Edenred is the global market leader in its field. 30% of the global share for global employee benefits belongs to the company, and this market is worth around €40 billion. Competitors and public comps here are Sodexo ( OTCPK:SDXAY ) and UP Group, which are the only two with a similar international peerage.That isn’t to say there isn’t a competition. The fight for customers in this business is brutal, especially in legacy markets such as France. In addition, if a Fintech player wants to, they can try creating a similar service as well, if they view the take-up rate and margins as appealing. Some banks have created JV’s with this in mind, and though none of them are big yet, this is a threat to […]
Protected by Patchstack