Would the proposed BNPL regulation be a game-changer? A look at EML Payments

  • May 28, 2020 AEST
  • Team Kalkine
Would the proposed BNPL regulation be a game-changer? A look at EML Payments


  • RBA is having an eye on the payment behaviour of the Australian and looking for any policy implication.
  • RBA’s Payment System Board reiterated that the retails payments regulatory review is pending and is expected to recommence towards the end of 2020.
  • EML Payments’ Chairman Peter Martin intends to sell a portion of his shareholding.
  • Afterpay also noted that major shareholders MUFG and Morgan Stanley trimmed their respective positions in the Company.

RBA, in a media release on 22 May 2020, highlighted the effect of the coronavirus pandemic on the country’s retail payment system. The Payment System Board members indicated that the retail payment providers had dealt well with the amended operational arrangements and adjustments due to COVID-19. The board would have an eye on the payment behaviour and look for any implications on the policy.

The Payment System Board had earlier announced a delay in the retail payments regulatory review citing COVID-19 as the reason. It reiterated in its release that the review is expected to be complete by 2021.

BNPL player Afterpay’s (ASX:APT) shares saw a massive sell-off on 27 May 2020. In addition to the news on regulation, one of the top shareholders of APT- Mitsubishi UFJ Financial Group, Inc. trimmed its position. Morgan Stanley, another shareholder, also lowered its stake from 8.2% (11 May) to 7.12% stake on 27 May 2020.

APT has been vocal against the groups that ask for similar regulations for BNPL services as there are for traditional loans. The player believes that the measures taken by the regulatory authorities in current times are aimed at assisting the larger banks.

EML Payments (ASX:EML), a Company working in the same line of business as APT, also came out with an announcement stating that its Chairman Peter Martin intends to sell a portion of his shareholding in the Company which might make people curious to know if everything is going well within EML.

In this article, we would look at the Company’s view regarding the selling of the shares of EML by its Chairman and cover the recent update.

EML Payments Limited; the Chairman intends to sell a portion of his shareholding

EML Payments Limited provides customised payment solutions for brands and their customers to make lives simpler. EML offers a complete range of off the Shelf solutions that can get funds out to staff, folks, families, or businesses.

EML got listed on the ASX in 2006 and has been on the upward trend since the listing. Although the YTD performance of the shares was -20%, in the last one month, the stocks have delivered an impressive return of 52.70%.

RELATED: This Fintech Player is smashing the index with good gains – EML

On 20 May 2020, the Company provided its trading update and highlighted its strategic focus and updated on PFS acquisition which had a positive impact on its share price. On the same day, EML made another announcement that Chairman Peter Martin intends to sell a small portion of his shareholdings in the Company in between 300,000 and 400,000 shares. Mr Martin is a long-term investor in the Company now owns 7,718,992 fully paid ordinary shares.

At EML, the board encourages its Directors and senior executives to buy or sell the shares based on their personal reasons and investment profile. Mr Martin would turn 70 in September 2020, and his shareholding forms a significant part of family investments. He expects to remain a substantial holder in the Company, however, seeing the present stage of life, family and other requirements, he is expected to sell some shares every year, and the sale takes place in conformance with published trading policy of the Company.

In the previous year, Mr Martin participated in the entitlement offer, which was raised to support the acquisition of Prepaid Financial Services (Ireland) Limited.

Let us look at the PFS acquisition details.

Acquisition Of Prepaid Financial Services (Ireland) Limited

On 1 April 2020, EML announced the conclusion of the acquisition of Prepaid Financial Services (Ireland) Limited. PFS is an EU-based provider of banking-as a-service technology and white-label payments. With the purchase of Prepaid Financial Services, EML Payments would become a major prepaid fintech enabler in the world.

The PFS acquisition has brought thrill for the combined EML and PFS businesses. There is an excellent collaboration between the sales, marketing, and business development teams, and it is a pleasure for the Company to see this and cross-sell respective solutions.

At present, the Company has started several integration assignments & anticipate finishing those over the upcoming 24 months. The Company expects net run-rate synergies of $6 million to begin in FY2022.

Trading Condition of EML during March and April 2020.

In March 2020, the G&I segment faced impacts of the coronavirus crisis in a few regions. The gross debit volume (GDV) declined 20% as compared to the previous corresponding period (pcp) because of the closure of the malls for three weeks in some countries. Its GPR division witnessed 10.4% growth during the month on pcp, and the Company expects to see this growth in the fourth quarter because the Australian salary packaging programs have introduced additional benefit accounts. Virtual Account Numbers (VANS) segment improved by 56% on pcp.

Unaudited Group EBITDA declined 37% because of the drop in the mall sales.

In April 2020, because of the government restriction on social distancing and social mobility due to COVID-19, EML’s customers in the retail malls segment across its global footprint except Sweden remain closed. This resulted in the fall in the G&I segment GDV by 53% to $31.4 million.

Apart from PFS, the Company’s GPR division provided GDV of $286.5 million, up 26% on pcp. The GDV from this segment was backed by Salary Packaging and robust volumes from the business of online gaming. After PFS got consolidated into with this segment, the total segment GDV reached $681.8 million. 

The VANS segment showed marginal indications of impact from coronavirus and the GDV during the month increased by 9% as compared to April 2019.

EML’s Strategic focus:

  • Long-term strategy to provide revenue & earnings diversification via organic growth & strategic acquisitions.
  • PFS acquisition was a key plank in EML’s plan of re-balancing revenue across its divisions.
  • Mall closures, social mobility limitations and social distancing conditions will have a significant impact on the mall gift card sales for the remaining part of FY2020. However, the Company is opportunistic that volumes will recover once lockdowns reduce and economies re-open. Meanwhile, the Company has halted its earnings guidance due to lack of reliable data on how and when the lockdown situation improves and the economy re-opens.

Stock Information:

By the end of the day’s trade, EML shares closed flat at $3.68. EML has a market capitalisation of $1.32 billion, PE ratio of 94.85x, and 359.7 million outstanding shares.

While EML continues to perform well on the ASX, the potential impact of the regulations is difficult to predict, and it would be interesting to see the market’s reaction once the review process is done and dusted.NOTE: $ denotes Australian Dollar, unless stated otherwise.


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