EML Payments: Strategic Review Update Raises More Questions Than Answers

We maintain our fair value estimate for no-moat EML Payments at AUD 0.80 per share. This is based on an equal-weighted probability of retaining its troubled European reloadable cards business. Shutting the Irish division, PCSIL would increase our fair value to AUD 1.00. Unfortunately, EML’s strategic review update raised more questions than answers. EML intends to focus on its profitable gift cards and reloadable cards businesses in Australia and the U.K., but there was no update on whether PCSIL will be kept or sold. We are surprised that EML is considering selling its real-time payments business, Sentenial, which could be to the detriment of EML’s future competitive position. Sentenial was acquired in late 2021 to enhance EML’s offerings beyond prepaid cards amid the evolving payments landscape.