EML Payments has been a very disappointing position in the Emerging Companies Portfolio since we bought it in early 2021, however, it showed signs of life this week with a strong ~30% rally. It came following news of more restrictions from the Central Bank of Ireland (CBI) regarding their PFS Card Services business which has been under regulatory oversight for nearly 2 years, given they deemed it lacked appropriate Anti Money Laundering (AML) controls. It was initially expected to take around 12-18 months to resolve with the CBI placing growth restrictions on that business. Those restrictions were tightened last week as we approach the 24-month mark since the issues first came to light, though the announcement caused the stock to pop on the day as they reiterated FY23 guidance of $235-245m in revenue and $26-34m in EBITDA. EML is extremely cheap, on one hand rightfully so, but they are still EBITDA positive and revenue is growing elsewhere in the business while these growth restrictions remain. With ~4% of shares short sold, we suspect any further progress with the CBI will see shares continue to pop higher.
- We are remaining patient with our position in EML given it’s still growing and in our view, does not need to raise capital.
MM is neutral to bullish EML ~50c
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