Ann: Advance Notice - EML FY20 Annual Results Presentation, page-70

My thoughts are this - EML is sitting on a high multiple. Yes it has cash and lots of it, yes overall company wide GPR is growing strongly, both through salary packaging and PFS - good. So is the incentives part of the G&I.

The issue is mall Gift Cards in my view. Yes the top line company wide GDV number is growing but the GDV specifically derived from mall gift cards is still critical to earnings and is very uncertain right now. This is because the bps margin achieved from mall gift cards is massive compared to all other areas. So essentially the transaction volume needed for gift cards is so much smaller than that needed from incentives, GPR and then VANs to achieve the same earnings.

The FY20 results included a robust and record result from gift cards in the Nov/Dec holiday period.

This FY is unlikely to repeat that result and the actual outcome for gift cards this holiday season is very very uncertain.

The results for gift cards during holiday season is clearly material because management won't provide guidance until Feb as it will have a big impact on what they can guide to.

So, yes it's great that GDV as a whole is growing strongly despite COViD and PFS is doing well - but people need to factor in the "quality" or margin being achieved on the new GDV being generated. For example a big part of GDV growth for PFS is welfare payments - a low margin area. Whereas their high margin GDV being currency/travel cards would be tracking near zero right now.

Until their is certainty around Covid EML will remain under pressure as their highest margin GDV is directly affected by Covid. All in my opinion and don't get me wrong I really like this company and highly rate the management team. They are very open with investors and tell it how it is. Just might keep the powder dry here for now but keep it on the watch list.