Emerchants Limited (ASX:EML) has signed a contract with leading mobile phone recommerce and recycling company Redeem via its fully-owned subsidiary Store Financial Services UK.
On 26 September 2014 Emerchants announced that it agreed to acquire Store Financial Services United Kingdom for approximately $25m. The acquisition has provided Emerchants with a platform to launch its reloadable business into Europe, leveraging off an established and profitable business. Store Financial Services UK si commonly referred to as Emerchants Europe.
The acquisition was a turning point for investors as various analysts and research firms upgraded their views for EML as it provides the company not only with additional earnings but also growth opportunities.
Redeem is launching is a new service in the UK which allows customers to trade in their phones for an instant reward card to offset the cost of their new device. Emerchants subsidiary Store Financial UK will be providing the cards with a maximum load value of 500.
Tom Cregan, Managing Director and Chief Executive Officer of Emerchants is “pleased to be working with Redeem” and commented on the agreement: “Our previous experience in the mobile phone recycling sector has enabled us to work quickly to launch this programme within a tight timeframe.”
He also believes the agreement to be beneficial due to the consumers’ “continued desire to upgrade their mobile devices.”
Redeem operates in 26 countries and has partnerships with major European mobile network operators.
Wise-owl believes that synergies from Emerchants’ European acquisitions are starting to materialise and similar announcements are expected to follow. Investors need to consider that the acquisition of Store Financial Services was not only strategically appropriate but it provides Emerchants access to a market that it 10x bigger than the Australian market. However EML has only recently been able to post its first profit and investors should not expect dividend payments any time soon. Emerchants’ low cash balance could result in a capital raising in the next three months which could then make the stock attractive for those who do not have exposure yet.
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Author: Imran Valibhoy
Nov 09, 2015
Since Joining the firm in 2006, Imran has worked on a range of M&A and Capital Market transactions in the natural resources, mining as well as projects in the renewable energy sector. Prior to joining Wise-owl, Imran worked at Euroz Securities in Perth, aiding in the advisory and valuation of companies in the mining and industrial sectors in Australia. Imran has a Masters in Banking & Finance from City University's Class Business School in London and a Bacheloor degree in Commerce from UWA.