The EML Payments Ltd (ASX: EML) share price is once again rocketing today, with EML shares up another 4.4% today at the time of writing to $5.63 a share. It’s shaping up to be the second day of big share price rises for EML in a row.
Yesterday, EML shares hit a new all-time high of $5.80. This new high finally vaults EML to above its pre-COVID highs. Even after cooling off since those highs, EML shares are now up 10.7% since yesterday morning, and 16.12% since last Thursday. It also means that EML shares are now up an eye-watering 257% since 23 March last year, as well as 33% in 2021 alone.
So who is EML Payments? And why are this company’s shares continuing to rocket higher?
Who is the company?
EML Payments is… a payments company which specialises in prepaid debit cards. These cards can be used for anything from a gift card to salary packaging to a cash card for use at a casino. EML operates across Australia, as well as in North America and Europe. Its payments platform is highly integrated with the US payments giant Mastercard Inc (NYSE: MA) in particular. EML works with a number of large clients, including the Queensland Government, Ladbrokes, Sportsbet, bet365, Shell Canada and Harley Davidson.
The company has been performing very well of late. In its earnings report for the 6 months ending 31 December on February, EML reported revenue growth of 61% to $95.3 million on the back of gross debit volume of $10.2 billion (up 54%). The company also reported a 30% lift in net profits after tax to $13.2 million. it expects this growth to continue as well, guiding for between $180-190 million in revenues and $30-33.5 million in net profits for FY2021.
Why are EML shares shooting the moon today?
As mentioned above, EML shares have been in demand since the company reported its earnings back in February. But investors have really stepped on the gas over the past week. The likely catalyst behind this recent bullishness was an announcement made by the company yesterday.
Before market open, EML announced that it had netted a major acquisition. The company will completely acquire Sentinal Limited through a binding share purchase agreement. Sentinal is a European company that specialises in account-to-account payments as well as open banking. EML’s management told investors that the Sentinel acquisition will expand EML’s product line to include non-card-based payments on its platform, amongst other positive synergies.
EML will pay 70 million euros for the deal, plus an “earn-out component of up to 40 million euros”. The funding for the takeover will stem from a combination of 38.9 million euros in cash and the issuance of 31.1 million euros’ worth of EML shares.
Evidently, investors have embraced this deal, judging by the performance of the EML share price since yesterday morning. At the current EML share price, the company has a market capitalisation of $2.05 billion.
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Sebastian Bowen owns shares of Mastercard. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends EML Payments and Mastercard. The Motley Fool Australia has recommended EML Payments and Mastercard. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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