Canaccord Genuity lowers target price on CAB Payments

Canaccord Genuity said CAB Payments' update highlighted the group's underlying outperformance relative to its estimated sector and subsector growth. However, CAB Payments also noted that conditions were difficult during the period.

"H124 results have suffered from the impact of lower revenues but also recurring operating costs being an estimated c.15% higher, due to the new business strain associated with an increased salesforce and establishment of EU and US offices," said Canaccord Genuity.

The Canadian bank said it was "disappointing" that short-term performance had fallen below its expectations but stated it was supportive of the strategy of continued investment in building out the platform, for what it believes to be a "valuable strategic asset".

With that said, Canaccord left its valuation methodology unchanged, stating that given a 17-19% cut to its adjusted underlying earnings and earnings per share forecasts, and a slight re-rating of the payments sector, this results in its new price target of 214.0p.

"If CAB can deliver against revised expectations, consistently, then the upside could be significant, hence we retain our 'speculative buy' rating," added the analysts.

Reporting by Iain Gilbert at Sharecast.com