There are some ASX payment shares that are growing rapidly which could be worth a look.
Some businesses are driving the evolution for making payments and transfers in an electronic form rather than cash.
These are two of them:
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EML Payments Ltd (ASX: EML)
EML Payments has a number of different payment services for clients to use. The company has general purpose reloadable offerings such as gaming payouts with white label gaming cards, salary packaging cards, commission payouts and rewards programs. EML Payments also offers physical gift cards, shopping centre gift cards and digital gift cards. Finally, the company offers virtual account numbers.
The ASX payment share was one of the companies that was significantly sold off during last year, dropping from $5.66 to $1.33. It has since recovered to around $4 as somewhat normal living and EML's financial performance returned.
In the first quarter of FY21 EML's total revenue grew 20%, compared to the fourth quarter of FY20, to $40.6 million. The amount of earnings before interest, tax, depreciation and amortisation (EBITDA) generated by the ASX payment share in the FY21 first quarter was $10 million, which was 69% higher than the fourth quarter of FY20.
Dominic Rose from Montgomery Lucent Investment Management said at the start of December that the company was bouncing back well from COVID-19 impacts. He said: "the recent encouraging vaccine news materially increases confidence in a solid earnings recovery in FY22. Market estimates are for earnings before interest, tax, depreciation and amortisation to rebound 40 per cent in FY22 to $74 million, still well below pre-COVID expectations of $95-100 million.
"Looking back, one positive arising from the pandemic was EML's ability to reprice and restructure the Prepaid Financial Services (PFS) deal in late March, allowing the company to retain a strong balance sheet ($118 million net cash as at the end of June) which offers optionality for further acquisitions. Valuation remains attractive for the growth potential of the business, in our view, with the stock trading on 12x recovered EBITDA (FY23 EBITDA $93 million)."
According to CommSec, the EML share price is valued at 38x FY23's estimated earnings.
Pushpay Holdings Ltd (ASX: PPH)
Pushpay is an electronic donation ASX payment share. It assists large and medium US churches to receive payments from donators.
The company has big goals – it is aiming for a 50% market share of the sector, which could translate into US$1 billion of annual revenue with all of the processing volume that could be done at that time.
Pushpay continues to boast of operating leverage and it's expecting more to come over the rest of FY21 after revealing that its FY21 EBITDAF (EBITDA and foreign currency) was expected to be higher, in a range of US$56 million to US$60 million.
The technology company recently announced that it had allocated an initial investment of resources into developing and enhancing the customer proposition for the Catholic segment of the US faith sector. Management said that this represented a significant milestone as Pushpay continues to execute on its strategy to become the preferred provider of mission critical software to the US faith sector.
Fund manager Ben Griffiths from Eley Griffiths said: "Over the last 12 months it has become clear Pushpay is at an inflection point for both cashflow and earnings. Under the stewardship of CEO Bruce Gordon, Pushpay has transitioned from a founder-led investment phase into an optimize/monetization phase. What is more surprising is the very conservative nature of the accounts (a rarity in small cap tech, outside Iress Ltd (ASX: IRE)). We believe the next few years for Pushpay will be rewarding and that COVID-19 will accelerate the already entrenched trend to digital giving/engagement from cash."
According to Commsec, the Pushpay share price is valued at 20x FY23's estimated earnings.
