Consensus community valuation
$4.43
Average Intrinsic Value
43.2%
Undervalued by
Active Member Straws
#ASX Announcements
Added 2 months ago

https://www.livewiremarkets.com/wires/eml-looks-set-to-thrive-as-economies-reopen

Key details from the trading update (20 May 2020):

  • March Group EBITDA of $1.9 million was down 37 per cent on the prior period. COVID-19 lockdowns drove widespread global mall closures, negatively impacting the Gift & Incentive (G&I) segment which mainly comprises mall gift cards (G&I gross debit volume (GDV) fell 29 per cent year on year with a larger earnings impact given the comparatively high 600 basis point revenue conversion rate). The reloadable (GPR) and the Virtual Account Numbers (VANS) segments were resilient, both generating strong growth in March with GDV up 10.4 per cent and 56 per cent, respectively;
  • April Group EBITDA of $2.7 million, including PFS contribution plus a $2.2 million breakage release. Most malls were closed during the month so G&I GDV experienced further sharp falls (53 per cent below the prior period). GPR excluding PFS produced strong GDV growth (26 per cent) reflecting salary packaging roll out and surprisingly resilient online gaming turnover. PFS’ GDV growth rate slowed from 39 per cent in January and February to 12 per cent in April – digital banking and multi-currency travel cards were impacted by lockdowns, partially offset by growth in government disbursements, although this mix shift was negative for contribution margins. VANS GDV growth was positive (9 per cent), albeit compressed by timing of new customer launches;
  • Cash conversion is tracking at around 100 per cent year to date, a strong improvement on 1H20;
  • Balance sheet is in a strong position with $125 million net cash as at the end of April, plus $37 million of breakage accruals (three quarters should convert to cash over the coming 12 months);
  • Management noted that although steps were taken to reduce headcount, cost cuts weren’t significant;
  • In late March when EML announced it had renegotiated the PFS deal (settled 31 March), the primary objective was to avoid bringing on debt into the capital structure so the company could survive at least two years with zero revenues (unlikely scenario) on a monthly cash burn rate of $5-6 million. Clearly, the business performed much better than this over March and April;
  • EML proudly provided some examples where its solutions were used to help vulnerable people during the COVID-19 pandemic. Nepo utilised EML to distribute emergency funds in the UK to support domestic violence victims while Epipoli deployed EML gift cards to aid the Italian Government in disbursing emergency funds to citizens in financial need;
  • Near-term, EML expects trading conditions to sequentially improve in May and June from the April low as malls around the world gradually reopen. By June, the majority of malls in Italy are scheduled to be reopened, 60 per cent in Germany, 50 per cent in the US and 45 per cent in Canada. Timing in the UK remains uncertain. EML has 1,100 mall programs globally.
  • PFS GDV growth has accelerated back to around 20 per cent in May; and
  • Management highlighted that the sales pipeline is as strong as ever. COVID-19 has fast-tracked many company’s digital plans and EML fully intends to take advantage of this.
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#1H20 Results
Added 6 months ago

The payments sector is currently changing in Australia and overseas and EML is amongst it. EML has now de-risked the business With 80% offshore revenue, 85% recurring revenue and strong reporting by all of its verticals in particular VANS and the salary sacrificing segment. Breakage from the cards business is becoming less relative as their verticals grow which is another positive.
EML has the reputation in recent years of beating expectations and reports a conservative outlook. The upwardly revised guidance range appears conservative and Could add further upside especially with the PFS acquisition adding to its earnings. Guidance has been flagged to $39.5m-$42.5m from $38.5m-$42.5m which if conservative a likely 2H beat is coming. Current prices are an opportunity to get into this company with more growth to come.

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#Overview
Added 2 months ago

Positive or Negative thoughts around EML?

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#Restructured Acquisition of PF
Last edited 4 months ago

As I thought, EML has restructured it’s proposed acquisition of PFS Financial so it falls in line with the current disruption to Covin-9. The initial acquisition price was $452m plus earnouts over three years. Today the upfront payment of around $252m will be funded by the recent capital raising which left the cash reserves at around $280m.

The acquisition was noted to be completed by the end of this week, with appprovals granted. This new deal will leave EML with cash on hand, nil debt and hence a strong balance sheet after the acquisition, albeit still some downside risk due to the mall side of PFS in Spain and France until we get to the other side of this pandemic.

This will make EML the worlds largest fintech in open banking and prepayments operating in 26 Countries. In the short term there will be price volatility due to the uncertainty of earnings of the business, but in the long term, this will set up EML well for the future. The cash in the bank will help,the business get through the pandemic and allowing it to seek another acquisition or expand the business for future growth.

 

 

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#Bull Case
Last edited 2 months ago

Amazing insights in the below livewire market outlook. See you all at the $5 party.

 

https://www.livewiremarkets.com/wires/strong-outlook-for-eml-in-a-post-covid-world

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#Broker / Analyst Views
Last edited 4 months ago

26-Sep-2019:  Livewire.com: "Buy Hold Sell: 5 hot small caps on a high"

The five stocks discussed in this particular "BHS" episode have appreciated by an impressive 243% on average over the last 12 months. Returns like this are usually divisive, with investors on both sides of the trade declaring them either structural winners, or overpriced hype stocks. High prices, high expectations, but with them, the chance of high returns.

Will the prices crash like Blackmores? Or are they set for years of outsized returns like CSL?

Of the five stocks discussed (ISX, JIN, EML, PET & APT) the two guest analysts - being Arden Jennings, Co-Portfolio Manager at Ausbil Investment Management, and Robert Miller, Portfolio Manager at NAOS Asset Management - only agree on one of them being a "BUY" - and that one is EML - which is discussed from the 2:44 mark in the video.

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#Business Model/Strategy
Added a month ago

PFS expressing interest to support the clients of the Wirecard collapse https://www.businesswire.com/news/home/20200626005239/en/ Hopefully a solution can be put in place that can be beneficial for all parties.

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#Bull Case
Added 2 months ago
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#Bear Case
Added 2 months ago

See attached report for full analysis.

 

Date of Analysis: 5/3/2020. Idea source: Small cap, Stock screener, (more than 50M shares). Analysis date price: AUD2.65. 

Framework outcomes 

Good Stocks Cheap: The price needs to drop -86% to AUD0.36 in order to be cheap.

Growth With Value: The price is cheap and, remaining so, can still move up 271% to AUD9.83.

View Attachment

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#Bear Case
Added 17 hours ago

Does anyone else have any thoughts on how this business copes with the onslaught of trouble brewing in the retail sector? I'm hoping Christmas renews interest in gift card purchases but other catalysts are out there? It's proving to be a real laggard in a recessionary environment. More so than I would have expected it to be

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