The EML Payments (ASX: EML) share price has rocketed 58% higher today. That makes it a 120% gain in a week!
What is EML Payments?
EML specialises in issuing and managing prepaid stored value products, ranging from reloadable cards through to traditional, single-store gift cards. The company was founded in 2001 and its head office is in Brisbane, Australia.
What’s going on with EML Payments?
Well, two things. One, I think investors are sensing a bargain. Between 18 February 2020 and 24 March 2020 the EML Payments share price had fallen by 76%. Was that fall justified? As I pointed out in my first article about EML last week, not many people are going to be shopping or buying gift cards when everyone is in lockdown.
However, its latest result showed a profit of $4.3 million and the company recently said in the first eight months of FY20 it generated operating cash flow of $22.8 million. It also said it had a cash balance of $278.6 million with $0 debt at the end of February 2020. Not a precarious position. I think the sell-off was overdone.
But today the company also announced it would be acquiring Prepaid Financial Services on renegotiated terms. PFS is a European provider of white label payments and banking as a service technology.
After completion, EML will have over $100 million of cash in addition to a breakage (contract assets) accrual of $34.8 million of which approximately 75% is expected to convert to cash over the next 12 months. The combined group will have a total cash overhead expense rate averaging between $5 million to $6 million per month.
I think EML, along with the tech shares revealed below for free, could still be great buys today:
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Disclosure: at the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.