Have been busy with work but did manage to sit on the call yesterday and read through the presentation deck:
- Agreement with @johnsham in that the business has transformed into a 'Diversified Payments Business'. Mall gift cards represented 65% pre Covid on EMl stand alone and would have made up 55% full year pre covid. If PFS had been included into EML's consolidated business for the month of march 2020, 50% of the revenue would have come from General Purpose Re loadable (GPR), 37% from Gifts and Incentive and 7% from Virtual Account Numbers (VANS) - The CEO announced on the call that PFS GRoss Debit Volume (GDV) was tracking along at 39% growth from Nov 19 - Feb 20. In April this reduced to 12% and in May it has re bounded to 20% after 19 days of the month. *This is very good news in that its bounced back 50% within the space of a month from the lows and hopefully by July this will be back to normal e.g. circa 40% with backdated payments. - Government payments for PFS along with the Salary sacrifices for NSW health and soon to be ACT health (circa 300k employees) are non discretionary meaning that the money is part of the salary and needs to be spent regardless of the economic condition. Even more interesting is when Tom was quizzed on the segmentation he replied with: Each of the $300k salary sacrifice people will pay $60 annually for an EML card/digital card. Most opt for the digital card in the app wallet where by there is no or very minimal fee for the merchant. When they were with westpac they would be a high dilution in merchant fees. e.g. think vertical business with high profit margin - Pipeline has never looked bigger and they have signed 20+ deals since Jan 1 2020 but whilst non are immediately are material looking at page 6 of the presentation there are some sleeping giants in control pay and digital /neo banks. Zip, Nimble, Zezzle and Scalapay are buy now pay later providers who are launching shortly or have just launched either domestically or about to in US and Europe. As these companies do all of the leg work and sign more merchant and the world recovers EML can sit back and earn fees on the GDV. Think about Afterpay and the growth of their GDV in the US recently (growing at 50% YOY which EML can do in 3,4 companies just mentioned above) - In regards to how quickly the GDV returns for the mall business this is not 100% clear although Tom advised that in Europe the GDV in this segment was only -47% vs 2019 in the first 189 days of may vs -95% less in the month of April 2020 vs 2019
New Executive Director - George Gresham - CEO commented and said that at the time of interviewing him George was offered a #2 role in a company about 10 times the size of EML and turned this down. This speaks volume to not only the potential he sees in the business but for the expertise and connections he has. Peter Martin the Chairman went out of his way but very humbly acknowledge that they are very pleased to have signed him. - Expect big things in the gaming and digital banking space. I feel the remainder of 2020 he will be working on many deals behind the scenes which will be rolled out in Q1 & Q2 2021 on wards. - He is an ex CFO and COO of a fintech about 3 times the size to EML in about 2013 so he has great experience in building the business with numerous verticals
Lastly the best comment on page 3 which featured trading conditions, dashboard and Balance sheet said:
'With $130m in cash EML is in the enviable position of being able to think long term about what we want the business to look like in 3 years and to make decisions to fund those actions which will generate long term value creation'
Put this one in the back of the draw until late 2022 where it should be a $10-$15 stock!
Thoughts?
EML Price at posting:
$3.62 Sentiment: Buy Disclosure: Held
(20min delay)