The market may be sinking today but the same cannot be said for EML Payments Ltd (ASX: EML) shares.
In morning trade, the ASX All Ords stock is up over 10% to $1.25.
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Why is this All Ords stock crushing the ASX?
The catalyst for this strong gain has been news that the payments company has signed an agreement to sell its Sentenial business. This includes its Nuapay services business.
According to the release, the company is selling the business to GoCardless for an enterprise value of 32.75 million euros (A$54.1 million). Though, this remains subject to adjustments.
This is approximately half the 70 million euros (A$112.7 million) that EML paid for the business in 2021.
The sale also includes a potential downward price adjustment linked to ongoing key contract performance, capped at 7.5 million euros, in the period up to completion. In addition, it has an earn out based on recurring revenue from new contracts signed by the Sentenial business between 1 February 2024 and 30 days after completion.
Pleasingly for shareholders, as the Sentenial business is unprofitable, management expects the deal to be earnings and cashflow accretive to the ASX All Ords stock in the first year.
It also highlights that it further simplifies EML's organisational structure and improves its ability to focus on its profitable core businesses.
Management advised that the proceeds from the sale will be used to reduce debt and strengthen the company's balance sheet.
Why is it selling the business?
As well as being unprofitable and projected to lose $2 million in FY 2024, the Sentenial business was determined to be non-core to the EML Group's operations. It does not have any material product or customer overlap with other business lines and is separable from the EML Group wider business.
Management believes that the agreement to sell Sentenial is a "significant milestone in the delivery of the EML Group's strategic review." This helps explain why this All Ords stock is crushing the ASX on Friday.
EML shares are now up approximately 150% over the last 12 months.
