Urban Wellness And Digital Platforms Will Power Multisite Expansion

Key Takeaways

• Rapid franchise, technology, and payments platform expansion can drive industry-leading revenue growth, recurring earnings, and margin expansion well above analyst expectations.
  
• Vertical integration and cross-segment offerings enable Viva to capture outsized growth, boost average revenue per member, and strengthen long-term profitability.
  
• Structural headwinds from digital fitness disruption, economic pressures, operational risks, rising compliance costs, and demographic shifts threaten growth, margins, and future revenue stability.

Catalysts

Operates health clubs.

• While analysts broadly agree that Viva Leisure's franchise network expansion will drive solid top-line growth and recurring fees, they may be underestimating the compounding effect of rapid international franchise penetration and technology rollouts-potentially accelerating revenue and profit growth far above current consensus as Plus Fitness, World Gym, and Boutique Studios scale across multiple continents in parallel.
  
• Analyst consensus positively views Viva's Technology and Payments growth, but the integration of proprietary platforms like Viva Pay and unified access apps across both owned and partner networks could enable unmatched margin expansion and recurring earnings, positioning Viva as the dominant payment and member-management provider in global fitness.
  
• Viva's unparalleled vertical integration across gyms, tech, and payments creates a powerful data-driven ecosystem, enabling the company to meaningfully increase yields from value-added wellness products (e.g., supplements, personal training, digital services), which is likely to drive sustained increases in average revenue per member and bolster net margins over time.
  
• As health and wellness spending becomes increasingly 'lifestyle essential'-especially among younger, urbanised consumers-Viva's combined scale and ability to capture cross-segment demand could produce outsized membership growth and reduce churn, supporting above-market revenue and stable, growing cash flows.
  
• The continued urbanisation of Australia's population and Viva's proven ability to profitably penetrate both metropolitan and under-served regional markets suggests substantial untapped growth potential in member numbers, aided by a diversified suite of club formats and digital offerings, further expanding the revenue base and operating leverage.

Viva Leisure Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Viva Leisure compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Viva Leisure's revenue will grow by 18.5% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 2.0% today to 6.0% in 3 years time.
• The bullish analysts expect earnings to reach A$18.1 million (and earnings per share of A$0.17) by about July 2028, up from A$3.7 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 22.1x on those 2028 earnings, down from 33.7x today. This future PE is lower than the current PE for the AU Hospitality industry at 33.1x.
• Analysts expect the number of shares outstanding to decline by 0.73% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 11.61%, as per the Simply Wall St company report.

Viva Leisure Future Earnings Per Share Growth

Risks

• Rapid advances and increasing adoption of home fitness technology, such as smart equipment and interactive digital platforms, may erode the long-term demand for Viva Leisure's physical gym memberships, which puts structural pressure on new member growth and could drive lower future revenue.
  
• Persistent cost-of-living pressures and broader economic uncertainty may cause consumers to reduce discretionary spending, including gym memberships, threatening Viva Leisure's ability to retain members and maintain its high recurring revenue streams over time, impacting both top-line revenue and earnings predictability.
  
• Viva Leisure's aggressive expansion through new locations and acquisitions carries the risk of overexpansion, as high upfront capital requirements for corporate sites and the embedded operational complexity of integrating new locations could result in inefficiencies, underperforming clubs, and increased operating expenses, ultimately reducing future net margins and return on capital.
  
• Greater regulatory and ESG scrutiny, especially regarding energy use in a footprint of nearly 200 corporate sites, could drive rising compliance costs and necessitate additional investments in sustainability, putting pressure on operating costs and net margins over the long term.
  
• Demographic shifts, such as the aging population and shrinking youth engagement in gym-based fitness, as well as intense competition from price-focused chains and digital wellness substitutes, could limit the growth of Viva Leisure's addressable market and lead to stagnant or declining membership, directly impeding future revenue and earnings growth.

Valuation

• The assumed bullish price target for Viva Leisure is A$3.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Viva Leisure's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of A$3.0, and the most bearish reporting a price target of just A$1.75.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be A$303.5 million, earnings will come to A$18.1 million, and it would be trading on a PE ratio of 22.1x, assuming you use a discount rate of 11.6%.
  
• Given the current share price of A$1.27, the bullish analyst price target of A$3.0 is 57.8% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.