ASX:EML
EML Payments Ltd
Investment Summary
The fund managers believe that EML Payments Ltd is positioned for potential growth despite recent volatility in share prices. They note that the exit from the PCSIL subsidiary eliminated a drain on profitability, and the sale of Sentenial has bolstered the company’s financial position by reducing debt and increasing cash reserves. In their opinion, EML's management is taking significant steps toward a turnaround, with a focus on core profitable businesses such as Australian and Global Gifting, and the UK arm of PFS. However, the absence of a formal growth strategy has raised concerns, with analysts highlighting the need for clarity at the upcoming AGM. Despite these challenges, the fund managers express optimism for a re-rating of the stock, anticipating improvements in earnings quality and progress on a substantial $65 million contract pipeline by mid-2025, suggesting that the current valuation appears attractive.
Commentary From The Managers
Endeavor Asset Management
28 Feb 2025
$0.97
- EML Payments (EML) increased 17.6% following a cleaner 1H25 result
- Company reaffirmed FY25 guidance and showed an improving outlook
- Market responded positively to further details on the proposed strategy for achieving FY28 goals
- Focus is on existing and new product verticals
- Endeavor Asset Management believes the stock remains very cheap
- Expect a re-rating as earnings quality improves
- EML is set to execute on its building contract pipeline of $65 million by mid-2025
Endeavor Asset Management
28 Feb 2025
$0.97
- EML Payments (EML) increased 17.6% following a cleaner 1H25 result
- Company reaffirmed FY25 guidance and showed an improving outlook
- Market responded positively to further details on the proposed strategy for achieving FY28 goals
- Focus is on existing and new product verticals
- Endeavor Asset Management believes the stock remains very cheap
- Expect a re-rating as earnings quality improves
- EML is set to execute on its building contract pipeline of $65 million by mid-2025
Endeavor Asset Management
31 Dec 2024
$0.84
- Endeavor Asset Management views EML Payments as a global payments company navigating recent volatility.
- The launch of the "EML 2.0 Strategy Plan" in November aims to drive organic profit growth and simplify operations.
- The strategy aspires for $95 million EBITDA by FY28, targeting a 13% annual growth.
- Initial market reaction to the strategy was positive, but sentiment shifted following the termination of CEO Ron Hynes.
- This shift led to a 17% decline in share price in December.
- EML is currently trading at 12x FY25 P/E and 6.5x EV/EBITDA, indicating an attractive valuation.
- Endeavor Asset Management remains optimistic about EML's ability to overcome leadership challenges.
- Commend the board's focus on selecting personnel that aligns with EML's long-term strategic goals.
Endeavor Asset Management
30 Sept 2024
$0.65
- EML Payments continues to face headwinds.
- Challenges are primarily due to the lack of a formal growth strategy.
- Endeavor Asset Management is optimistic that upcoming AGM will address these challenges.
- The AGM is expected to provide clearer direction for EML Payments' future growth path.
- Endeavor Asset Management continues to hold because of the potential for improvement.
Endeavor Asset Management
31 Aug 2024
$0.71
- EML Payments (EML) pulled their forward-looking guidance at FY24 result.
- Share price has declined by 25% following the result in August.
- Management plans to reissue guidance and present a refined strategy at the AGM.
- This will occur after the completion of their restructuring and asset sales.
- Endeavor Asset Management took advantage of a large sale transaction from a shareholder closing their fund.
- While residual selling may keep pressure on the share price, we expect a reset of market expectations ahead of the AGM.
- Endeavor Asset Management continues to hold due to the potential catalyst from upcoming developments.
Endeavor Asset Management
30 Apr 2024
$1.01
- Endeavor Asset Management has noted positive developments from EML Payments regarding the settlement of PFS Group liabilities.
- The settlement occurred at a discount to face value.
- Restrictions on PFS UK customers have been lifted, signaling potential growth opportunities.
- Despite these positives, EML's share price experienced a decline of 17.9% in April, following a previous 24% rally in March.
- Endeavor Asset Management anticipates near term churn in the share register.
- However, there is confidence that EML Payments is well positioned to resume growth at sustainable rates.
Endeavor Asset Management
31 Mar 2024
$1.20
- Endeavor Asset Management invested in EML Payments to capitalize on a turnaround opportunity.
- EML has exited the problematic PCSIL subsidiary, eliminating a drain on profitability.
- The sale of Sentenial further strengthens their financial position, with proceeds used to reduce debt and build a cash buffer.
- EML is now focused on core profitable businesses – Australian and Global Gifting, and the successful UK arm of PFS (PFSL).
- EML is poised for growth.
- Analyst projections suggest significant upside based on future earnings.
- EML's management team is actively implementing a turnaround strategy focused on cost reduction, margin expansion, and core business growth.
- Endeavor Asset Management believes the streamlined operations, clear path to profitability, and valuable core business put the company in a good position.
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.