Canaccord Genuity slashes target price on CAB Payments

Analysts at Canaccord Genuity slashed their target price on payment processing and foreign exchange business CAB Payments from 585.0p to 246.0p on Tuesday after the group's "surprise and significant" negative trading update.

CAB Payments tumbled after warning on full-year revenues, pointing to changes in market conditions in some of its key currency corridors, as well as ongoing uncertainties surrounding the Naira.

The company, which only debuted on the London Stock Exchange a few months ago, said total group revenue rose 10% on the quarter in Q3 to £105.5m. However, in recent weeks there have been a number of changes to the market conditions in some key currency corridors, on top of the ongoing uncertainties surrounding the Naira, which are impacting both volumes and margins.

Canaccord Genuity said it had been "surprised by the rapid turn of events" and noted that, in reality, it appears difficult to forecast future revenues with any degree of certainty.

"The medium- and long-term growth opportunities will be balanced by the speed at which trading appears to have deteriorated. Consequently, we believe investors are more likely to err on the side of caution with respect to short- and medium-term expectations," said Canaccord.

The Canadian bank, which rolled forward its target date to 2024 and cut the stock to 'speculative buy' from 'buy', said it now values CAB at a 10% discount to the sector average enterprise value/EBITDA and price-to-earnings multiples, noting that the global FX and payments sector has de-rated by roughly 20% since August.

Reporting by Iain Gilbert at Sharecast.com