EML’s Payment (ASX: EML) continues to sell off this morning, disappointing investors who were expecting a rebound in line with a market rallying on the back of retreating COVID-19 epidemic fears. EML Payment’s continued innovation in its products has seen it grow from a small company to a leader in prepaid financial services.
The company has released its half-yearly results which saw them increase revenue to $59.2m (up 25%), furthermore its gross profit margins at 76% (up 3%) and EBITDA of $19.7m (up 42%). These results, however, did not meet investor’s expectations as the share price dropped 13% with the company revising its guidance for revenue and EBITDA. Moreover, the continuous fear around the COVID-19 saw the share price continue to tumble.
EML Payment, over the last year, has seen the company expand into the international market with presences in the European markets. They have recently acquired an Irish fintech Prepaid Financial service which will give them the ability to provide e-wallets, payout programs, and software for transactional banking services. This acquisition will compete with UK’s Monzo and Revolut. However, the deal has been delayed until March or April. But once the deal is complete, these endeavors could result in margin expansion, which would attract a higher earnings multiple from the market and drive a share price re-rate.
In addition, EML Payments partnered with Simon Property Group, a global shopping mall operator, for a multi-year agreement. This deal expands EML Payment’s presence in the US market which in return saw a 26% increase in the company’s gift and incentive gross debit volume (GDV). Gross debit volume is the transaction volume of all the services that EML Payment offers. The partnership only recently launched in January and the GDV only reflects 2 months.
EML Payment has a natural competitive advantage through selective partnerships and acquisitions of companies that help with the company’s operations. As a gift and incentive card business, the company has recently pushed its service into the gaming sector. They have tailored the spending and rewards of customers into a single prepaid card whereby customers can re-spend without the delay of traditional banking channels. This benefits partner by increasing incremental revenue and margins. Some of EML payment’s key partners have international presences such as SportsBets. Bet365, Ladbrokes and many more.
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