The EML Payments Ltd (ASX: EML) share price has had a strong start to the week.
In morning trade the payments company's shares raced almost 8% higher to an all-time high of $2.22.
Why is the EML Payments share price racing higher today?
Investors have responded positively to an announcement this morning which revealed that EML Payments has acquired UK-based Flex-e-Card Limited.
According to the release, on Friday EML Payments executed a share purchase agreement to acquire the shopping centre-focused gift card solutions company for a total consideration of £21.6 million (A$40.5 million). This will be funded by its cash reserves (A$25.5 million) and its debt facility with a major Australian bank (A$15 million).
Flex-e-Card, which trades as flex-e-card and flex-e-vouchers, has 226 shopping centres under contract in Europe and the United Arab Emirates.
It is expected to generate $4 million to $4.1 million of EBTDA in the first year of ownership. Which equates to approximately 14.5% EBTDA per share accretion based on the mid-point of the company's FY 2019 EBTDA guidance of $27 million to $28 million, which was reaffirmed this morning.
There is no working capital input requirement from EML Payments post-close due to the business being cash generative.
Management explained the rationale for the acquisition. Advising that it enhances its Gift & Incentive segment, expands its presence into new markets, improves its product capabilities, and has a track record of delivering consistent growth. In respect to the latter, Flex-e-Card has grown its Gross Debit Volume CAGR by 24.7% through to 2018.
EML Payments is just one of a number of payment companies charging higher in 2019. Fellow payments companies Afterpay Touch Group Ltd (ASX: APT), iSignthis Ltd (ASX: ISX), and Zip Co Ltd (ASX: Z1P) have all generated market-beating returns this year, making it one of the standout industries on the ASX.
