Forum Topics EML - PFS Fall out
UncleWally
Added 5 years ago

It appears there has been a change in sentiment towards EML in the past week by some advisors.

Aversion has given way to cautious optomism.

A couple of articles on Livewire and Ausbiz implying it is unlikely EML will face as large a fine nor the cost of ongoing compliance as first thought.

I also understand that PFS's earnout will now be considerably less than the maximum $110M possible when the acquisition occurred. Combined with the $170M reduction in price EML negotiated last year, many of the concerns that lead to EMLs SP crash seem to have eased. 

I'm also aware EML has been moved back to BUY by a prominent advisory service in recent days. I wouldn't be surprised if the trend contines, it seems to happen that way.

I suspect as EML addresses these regulatory concerns and the company continues to grow the SP will return to previous levels. It's just that we always seem to take the elevator down and the stairs back up.

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General1952
Added 5 years ago

Catching up on some EML news I see that Lee Britton, who was Chief Commercial Officer of PFS, and became CEO EML Europe on the takeover of PFS, has resigned recently. Might have been a forced resignation, due to the regulatory issues with the CBI, or he may have seen the writing on the wall that there would be no earn out fees as per the takeover agreement, and he's walking now.

Either way I think this will be a positive, given he oversaw the Company that got into the regulatory mess, and by his own admission was "crap at admin" and one of the things he will miss will be "the pub and being very well lunched" - not exactly someone who inspires confidence on the regulatory side!

Think the major concerns regarding possible harsh outcomes of the CBI investigations have been alleviated, yet EML's current market capitalisation is still approx 30% lower than it was prior to the investigation. Although there will be ongoing extra compliance costs associated with the remediation plan, I don't think the market has factored in the likelihood of a reasonably successful outcome to the CBI probe. Lots of catalysts for growth for EML going forward, so I think there's still plenty of upside to the current stock price.   

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mikebrisy
Added 5 years ago

That's interesting information. I agree with your analysis, EML SP is still being weighed down by the regulatory issue. Based on historical valuations, once the issue is resolved and provided the penalties and remedies are modest, we should see a rapid return to $5-$6 range, so a clear +30% update without factoring continued business growth. We just need to be patient because these issues can take years (!) to come to conclusion, but it will hopefully be less if management are working positively and proactively with the regulator.

Upside is potentially even higher once the market start viewing the growth prospects clear of regulatory questionmark.

DISC: Held in SM and IRL

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jayjayjayjay
Added 5 years ago

I firmly believe Lee Britton resigned now knowing his earn out fees as per the takeover agreement are not achievable and instead of wasting his time he has decided to walk out. He has done an incredible job of building PFS to the business it is today winning many awards along the way for this prior to EML taking over the business. Obviously the CBI matters are related to PFS during his time and it is unfortuante that he may be remebered for this. PFS has continued to perform strongly since EML took over the business and was a significant reason why EML performed so well during the COVID months of 2020. Had the regulatory issues not occurred the share price in my opinion would be plus $7. However we are not here and that is obviously the CBI issues relating to it. I agree that these investigations should finalise in coming months and I do firmly believe once the issues are resolved we will see a bounce in the SP. Further we should see a strengtheing in the entire business.

 

Currently EML are signing on avg 2 deals per week. Some of these are significant. One of the most exciting ones is with NSW transport for their OPAL card. Pipeline of deals is extremely exciting. We should see the sentenial deal be agreed shortly. Open banking is extremely exciting and the future. Only today there was an article in the AFR about Mastercard extending in to Open Banking. This shows that Tom Cregan (CEO) who I have significant trust in understands the payments sector and is not afraid to move in to areas ahead of the times. I am really excited about this move and the catalyst for growth it will offer.

Main concern at the moment is the CBI outcome taking so long and stopping EML signing deals through the PFS business side. I personally think today's price is an opportuinity with a long term view. 

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