Currency in AUD
Last close As at 09/06/2023
AUD0.72
▲ 0.04 (5.88%)
Market capitalisation
AUD269m
Research: TMT
EML Payments has announced that due to concerns raised by the UK regulator, the Financial Conduct Authority (FCA), it will temporarily cease onboarding new customers in relation to its UK subsidiary Prepaid Financial Services Limited (PFS UK). Concerns are similar in nature to those raised by the Irish regulator relating to PFS’s Irish subsidiary and should be addressed as part of the remediation programme that is currently underway. The cap on new business is likely to reduce FY23 revenue by up to c 2% and to resolve the issue, is likely to require additional compliance and risk management expenditure; we maintain our forecasts pending the update on the strategic review due on 25 November.
EML Payments |
UK regulator raises concerns |
Regulatory update |
Software and comp services |
1 November 2022 |
Share price performance Business description
Analyst
EML Payments is a research client of Edison Investment Research Limited |
EML Payments has announced that due to concerns raised by the UK regulator, the Financial Conduct Authority (FCA), it will temporarily cease onboarding new customers in relation to its UK subsidiary Prepaid Financial Services Limited (PFS UK). Concerns are similar in nature to those raised by the Irish regulator relating to PFS’s Irish subsidiary and should be addressed as part of the remediation programme that is currently underway. The cap on new business is likely to reduce FY23 revenue by up to c 2% and to resolve the issue, is likely to require additional compliance and risk management expenditure; we maintain our forecasts pending the update on the strategic review due on 25 November.
Year end |
Revenue |
PBT* |
NPATA** (A$m) |
Diluted EPS* |
DPS |
P/E |
EV/EBITDA |
06/21 |
192.2 |
30.2 |
21.0 |
6.6 |
0.0 |
8.1 |
4.9 |
06/22 |
232.4 |
16.0 |
19.3 |
3.4 |
0.0 |
15.6 |
6.1 |
06/23e |
256.7 |
18.9 |
10.7 |
4.0 |
0.0 |
13.3 |
4.9 |
06/24e |
287.8 |
25.8 |
22.6 |
5.4 |
0.0 |
9.7 |
4.0 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. **NPATA = net profit after tax, excluding acquisition-related costs.
EML Payments has agreed to temporarily cease onboarding new customers, agents and distributors in relation to PFS UK after the FCA raised concerns. These are similar to concerns raised by the Central Bank of Ireland in EML’s Irish subsidiary, PFS Card Services (Ireland) Limited, for which the company is currently undertaking a remediation programme. The cap on new business will remain in place until the FCA is satisfied that PFS UK’s remediation plan has been successfully executed and has passed a third-party assessment. EML estimates that this temporary measure will reduce FY23 revenue by less than A$5m – we assume this is primarily due to lower establishment fees. EML is undergoing a strategic review, with the results due to be announced at the AGM on 25 November.
|
|
Research: Financials
Manx Financial Group (MFG) had a strong H122, with a PBT of £2.3m more than doubling and a return on average equity (ROE) of 16.8%. Loans grew 16% as the group continues to reposition itself into prime lending segment ahead of the more challenging macroeconomic environment. The net interest margin improved to 8.9% (8.5% in H121) and impairments remain under control with an annualised charge of 1.9% (2.1% in H121). Conister Bank (MFG’s bank) has formally applied for a UK branch deposit-taking licence on 25 October. This will give this Isle of Man bank a greater foothold in the UK for growth. The balance sheet is well capitalised (total capital 17.7%, CET1 of 14.2%) and still carries surplus liquidity to fund expansion plans. The bank is trading at an FY21 P/BV of only 0.8x despite its track record of ROE being above its cost of equity (COE, which we estimate at 10–11%) and ability to expand its balance sheet.
Get access to the very latest content matched to your personal investment style.