Growth Focus: EML Payments Ltd (EML)

by Patrick Taylor

Date of Data Capture: 20/9/2017


Classification: Transaction & Payment Services

Current Price: $1.945

Market Capitalisation: $476M

Forecast Sales Growth: 35.9%

Yield Estimate: 0%

Consensus Price Target: $2.03

# Covering Analysts: 4

Discount at Current Price: 4.37%

Price Target Trend: Increasing-Flat

Signal Timeframe: Monthly-Weekly-Daily

Trend Bias: Up-Flat / Long-Short

Short-term: Positive-Neutral
Medium-term: Positive-Neutral
Long-term: Positive

Recommendation: Buy

Focus: Capital Growth

Set up Notes:
• EML is moving out of a 12-month medium-term consolidation after rising over 200% from late 2015 to late 2016. Right now they are pushing up against $2 resistance but show good fundamental and technical momentum here.
• Earnings growth has been strong over the last two years and this is set to continue with strong forecasting for sales, earnings and profits through to 2020, maintaining steady margins.
• Positive signals cross the major timeframes though expect volatility and a pullback or two before the ceiling breaks to reveal the old peak high target at $2.20 and blue sky above.
• Structural resistance sits at $2.00 and $2.20 with structural support layered from $1.90 to $1.80.

Growth Focus: EML Payments Ltd (EML)

Our primary focus here is capital gain, we will select our stocks from the ASX top 500 All Ordinaries Index.

When the cards are running hot it makes sense to increase your stake. That is what we are looking to do here with EML Payments Ltd (EML) as the payment solutions company continues to their winning streak of strong earnings and profit growth. With excellent performance and strong forecasting ahead of them, we are confident they will stay ahead of the pack.

Originating from Queensland, EML began dealings in 2003 as a gift card provider but has since grown to offer payment solutions to major global corporates across Australia, Europe and the US. Totalling billions of dollars, these payments are facilitated through over 800 payment, payout, gift and reward programs using physical, mobile and virtual payment cards. With ongoing expansion moving ahead with new contracts and acquisitions in Europe and North America we think the odds are stacked in their favour.

EML has shown excellent fundamental performance and grew earnings by over 50% last year (over 100% the year before) and seem set for continued growth with consensus forecasts upping the ante with strong earnings growth seen carrying through to 2020. Expectations are positive across sales, profits and earnings and the attractive forecasts are supported by high margins that are also set to increase to nearly 80% in the near future. With low costs and good cash flow we see plenty of potential for continued organic growth being bolstered by an acquisitive growth strategy that should see them remain a cut above the rest.

Technically, in the bigger picture we see pricing in the early stage of a potentially significant new long-term uptrend after EML consolidated back by 36% over 12 months from their peak price achieved in late 2016. This peak followed a rally of 266% that began the year prior with a similar long-term signal we are following here again. After basing around $1.50 early in 2017 they broke linear resistance by mid-year and began rally back up to where we find them now, working against $2.00 structural resistance. While we see good momentum across most of the major timeframes, we do expect some volatility and even a potential pullback as the price chips away at that ceiling, but you would need a big blind spot to not see their potential.

With excellent performance, aggressive forecasting and an exciting growth profile backed by strong cash flows, we are happy to chip in and lay our cards on the table as we are confident EML Payments Ltd will continue to come up Trumps.

**Disclosure: Taylor Securities clients and staff may have exposure to the stocks we research and write about.**


This report was produced by Taylor Securities Pty Ltd, which is a Corporate Authorised Representative (Number 414063) of Bespoke Portfolio Pty Ltd (AFSL 341991). Taylor Securities and Patrick Taylor (Representative number 414064) have made every effort to ensure that the information and material contained in this report is accurate and correct and has been obtained from reliable sources. However, no representation is made about the accuracy or completeness of the information and material and it should not be relied upon as a substitute for the exercise of independent judgment. Except to the extent required by law, Taylor Securities and Patrick Taylor does not accept any liability, including negligence, for any loss or damage arising from the use of, or reliance on, the material contained in this report. This report is for information purposes only and is not intended as an offer or solicitation with respect to the sale or purchase of any securities or financial products. The securities or financial products recommended by Taylor Securities and Patrick Taylor carry no guarantee with respect to return of capital or the market value of those securities or financial products. There are general risks associated with any investment in securities or financial products. Investors should be aware that these risks might result in loss of income and capital invested. Neither Taylor Securities and Patrick Taylor nor any of its associates guarantees the repayment of capital. WARNING: This report is intended to provide general financial product advice only. It has been prepared without having regarded to or taking into account any particular investor’s objectives, financial situation and/or needs. Accordingly, no recipients should rely on any recommendation (whether express or implied) contained in this document without obtaining specific advice from their advisers. All investors should therefore consider the appropriateness of the advice, in light of their own objectives, financial situation and/or needs, before acting on the advice. Where applicable, investors should obtain a copy of and consider the product disclosure statement for that product (if any) before making any decision.

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