Why the EML Payments Ltd (ASX:EML) share price is up 13% today

One of the best performers on the Australian market during Monday trade has been payment solutions provider EML Payments Ltd (ASX: EML). EML’s share price has risen 13% to $1.62 at the time of writing following this morning’s announcement that it has entered into a 5 year agreement with German shopping mall operator ECE Projektmanagement G.m.b.H & Co. KG (‘ECE’) to manage its new consumer gift card program for 87 of their shopping malls in Germany.

The new gift card program is expected to launch in October 2018. It will be issued by EML’s recently acquired Irish FinTech Perfectcard DAC and replaces the current voucher program in ECE’s shopping malls.

The strategic rationale behind the Perfectcard acquisition was for EML to provide a streamlined offering where it acts as both the issuer and technology provider to enhance the economics of these types of payment programs. For the ECE program, EML forecasts annualised Gross Debit Volume of A$142 million with a revenue conversion ratio in line with other non-reloadable card programs the company manages.

Foolish takeaway

The deal with ECE will increase EML’s Gross Debit Volume and its top line via the fees it earns for processing transactions plus any breakage that was 42% of total revenue in the first half of FY18.

Despite today’s share price gain, EML’s share price is still down 13% in 2018 as it tries to recover lost ground from the large sell-off following the release of the company’s half-yearly in February. EML’s half year numbers were below the market’s expectations and resulted in a 40% drop in the company’s share price bottoming at $1.06 in early April.

Attention will now turn towards the release of EML’s full year result and outlook for FY19 on August 22. Alongside Zip Co Ltd (ASX: Z1P), EML remains one of the more intriguing FinTech companies listed on the Australian market that is attempting to follow in the footsteps of market darling Afterpay Touch Group Ltd (ASX: APT).

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Motley Fool contributor Tim Katavic has no financial interest in any company mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO and Emerchants Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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