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Why the EML Payments share price jumped 8% to a record high today

The EML Payments Ltd (ASX: EML) share price has been a strong performer on Tuesday.

In afternoon trade the payments solutions company’s shares are up 6.5% to $5.20.

At one stage they were up as much as 8% to a record-high of $5.27.

Why is the EML Payments share price surging higher today?

Investors have been buying EML Payments’ shares on Tuesday after it revealed that it has been awarded an agreement with NSW Health.

This agreement will see EML Payments become NSW Health’s provider of branded General Purpose Reloadable card programs for employee Salary Packaging.  The initial term of the agreement is five years, but there is an option for it to be extended by a further two years.

NSW Health will be using the revolutionary EML Salary Packaging technology solution. This allows customers to have multiple benefit accounts which are funded through a single card managed by a virtual wallet. This means that salary packaging participants no longer need to carry a card for every benefit account.

According to the release, once fully transitioned from the incumbent provider to EML, it expects NSW Health to transition approximately 49,000 employees participating in salary packaging to an EML Payments program.

Including this contract, EML Payments expects to provide services to more than 300,000 benefit accounts by April 2022. Further, total annual GDV for the salary packaging vertical is expected to be approximately $2.3 billion once this transition, and programs currently in transition, have been completed.

No changes to its previously announced FY 2020 guidance have been made. This means EML Payments is still aiming for revenue of $116 million to $132 million, EBITDA in the range of $38.5 million to $42.5 million, and NPATA in a range of $26.2 million to $29.4 million.

This compares favourably to revenue of $97.2 million, EBITDA of $29.1 million, and NPATA of $20 million in FY 2019.

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Emerchants Limited. The Motley Fool Australia has recommended 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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