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Is the EML share price the gift that keeps on giving?

The EML Payments Ltd (ASX: EML) share price was a standout performer on the ASX last year, posting a tremendous 220% increase and capping off the year with its inclusion into the S&P/ASX 200 (INDEXASX: XJO).

With shares up nearly 13% already this year, the EML share price is showing no signs of slowing down. So, what is there to know about this high-growth ASX fintech stock and is it too late to invest?

What does EML do?

EML Payments is a financial services company that specialises in issuing and managing prepaid stored value products. These products range from reloadable cards through to traditional, single-store gift cards. Here’s a run-down of the primary aspects of EML’s business.

Gifts and incentives

EML’s gifts and incentives segment involves the provision of single-load gift cards for reward programs and shopping malls. EML currently has more than 900 mall gift card programs under management across North America, the UK, Europe and the UAE.

EML also helps businesses design tailored reward programs by using its latest technology to influence consumer behaviour and foster brand loyalty. 

In FY19, EML’s gifts and incentives segment generated $66 million in revenue and $52 million in gross profit, an increase of over 40% in both measures compared to the prior corresponding period (pcp).


EML provides reloadable cards to major betting companies including Sportsbet, Ladbrokes, bet365 and Pointsbet Holdings Ltd (ASX: PBH). The main value-add proposition to these betting companies is the speedier transfer, and in turn higher volume, of funds.

EML estimates that the majority of all funds withdrawn onto its prepaid cards are re-spent on the account within 1.5 days of the withdrawal, and most do not incur merchant service fees. The saving in merchant fees and faster re-spend drives incremental revenue and margin for gaming partners.

EML currently has 14 programs in the gaming industry across Australia, USA, Europe and the UK, and expects to grow to 30 programs by 2022.

Salary packaging

EML works with salary packaging companies in Australia such as Smartgroup Corporation Ltd (ASX: SIQ) to provide a single card that categorises spending into multiple sub-accounts and facilitates custom usage restrictions. This enables employees to carry only one card, which can access both the salary packaging account and the meal and entertainment account.

EML secured a major contract in this space last week, signing a 5-year agreement with NSW Health.

Virtual account numbers (VANs)

Virtual account numbers are single-use, randomly-generated card numbers that can be used to make payments.

EML provides businesses with a competitive edge through proprietary technologies and custom solutions that make virtual cards safer, quicker, more practical and potentially, more cost-effective. 

VANs is EML’s smallest segment, contributing $6.4 million in revenue and $4.4 million in gross profit for FY19.

Is it too late to invest in 2020?

Despite EML’s tremendous growth to date, there are a few things in the company’s favour that suggest this may only be the beginning.

Game-changing acquisition

In November last year, EML acquired Prepaid Financial Services (PFS), a leading provider of white label payments and banking-as-a-service technology across the UK and Europe. For the 12 months to June 2020, PFS is forecast to process $5.3 billion of payments and, in turn, generate net revenue of $84 million and earnings before interest, tax, depreciation and amortisation of $24 million.

This acquisition is EML’s largest deal to date and provides the company with exposure to the previously untapped financial services sector, particularly in the rapidly emerging European neo-banking segment.

Deregulation of betting in the US

In May 2018, the Supreme Court of the United States lifted the federal ban on sports betting. Since then, around 20 states have legalised sports betting. 

As the betting industry in these states kicks off, and more states pass bills in favour of sports betting, a huge market is opening up for payment systems and reloadable cards. 

If the odds are in EML’s favour, the company could be set to capitalise on this multi-billion-dollar industry for many years to come.

Foolish takeaway

EML Payments is an exciting fintech company that is highly scalable, specialises in niche verticals, and has promising tailwinds at its back. However, with shares trading at 154x earnings, these factors appear to already be priced in. 

There are many risks to the market’s lofty forecasts, for example US betting markets developing slower than expected or EML’s gaming partners failing to earn market share. Despite this, I think EML could prove to be a great buy-to-hold investment over the long-term.

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Cathryn Goh 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 and Pointsbet Holdings Ltd. 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.