EML slides amid UK regulatory concerns - Markets

PFS Card Services (Ireland) is currently operating under a “material growth cap” due to expire in December 2022.

RBC Capital Markets analyst Garry Sherriff is worried about the regulatory investigations pilling up at EML Payments, saying it creates uncertainty for investors.

“The unknown timing and quantum of regulatory investigations will likely continue to weigh on EML until these issues are resolved, and the strategy refresh is unveiled, the latter at the AGM in November,” he told clients.

“EML’s largest revenue exposure is Europe [around 65 per cent group sales], which is where each of the investigations to date are occurring.”

Mr Sherriff adds that several senior hires across compliance and risk management announced this morning are likely to result in a “permanent increase to the cost base, quantum unknown at present”.

RBC Capital Markets has a $1.75 price target well above the 45¢ price, following Monday’s large fall.

UBS analyst Tim Plumbe meanwhile said they would not make adjustments to his $1.15 price target before he had assessed the impact of the “regulatory concerns.”

EML shares are down 80 per cent so far this year compared to a 9 per cent decline in the broader share market index largely due to the regulatory action

The payments company was also the subject of interest from private equity firm Bain Capital which walked away in April without reaching an agreement.

Ethical investment manager Australian Ethical ceased to be a substantial holder following Monday’s regulatory update.