The EML Payments Ltd (ASX: EML) share price is currently up by 11% after the company announced a deal in Spain.
EML is a business that provides payment solutions in a variety of different ways such as gift cards, electronic cards, customer payouts, salary packages and so on.
EML’s latest European win
The ASX payments share announced that EML and Correos, Spain’s national post office network, will support the issue of a government contract known as the Bono Cultural Joven 2022 tender. This will support the ‘cultural sector’ which was hurt by COVID-19.
Around 500,000 virtual prepaid cards will be loaded with €400 and will be issued to eligible 18-year olds, with funds to be spent on various products and activities like the performing arts, live music, film, libraries, museums, festivals, sheet music, records, books, audiobooks and magazines.
The total value loaded through this stimulus program is expected to be around A$320 million at the current exchange rates.
This program will contribute to revenue and EBITDA (EBITDA explained) in FY23. This adds to other government stimulus programs EML has supported in the last 12 months. It could be a handy boost for profit, which is a key driver of the EML share price.
EML said this programme is expected to utilise a material proportion of the growth cap imposed on its European licence by the Central Bank of Ireland and that remains in place until expiry in December 2022.
Management comments
The EML head of Spain, Emilio Gutierrez, said:
Our business relationship with Correos goes back a long way, and we’ve achieved many milestones together. We’re delighted to continue to build on this partnership with such a significant and important initiative in helping support the arts sector across Spain.
Final thoughts on the EML share price
I’m not surprised that investors have reacted positively to this news. It’s a good win and bodes well for further European progress.
EML shares have dropped significantly – down 60% over the past year. There’s no doubting that’s painful. However, the business is doing the right things to achieve long-term growth.
I think the business has plenty of globally growth potential, expanding in different segments. While a global recession would hurt growth, rising interest rates should help generate earnings from the cash it holds for clients.
At the current EML share price, with rising interest rates, I think EML is an attractive long-term buy.
