Canaccord Genuity raises GB Group to 'buy'

Canaccord said it had "long admired" GB for its reliable low- to mid-teens percentage organic growth, benefiting from secular global themes such as fraud prevention and the increasing need for enterprises to "validate and verify" identities, location, age and other metrics for new and existing customers.

While they acknowledged that the company had "suffered more from Covid-19 than some of its software peers", largely due to 20% sales exposure to impacted sectors such as leisure, travel and gambling, the analysts said they now see "several positive momentum catalysts on the horizon" for GB.

"Organic growth and margins have likely troughed this year and should expand again in FY22," said Canaccord, which added that 2021 full-year consensus expectations of a 10% revenue and 39% adjusted earnings per share decline seemed "too pessimistic" given positive growth in the first quarter and "gradually improving demand" in some of its more impacted verticals.

"Our FY21 EPS estimates are 20% ahead of Refinitiv consensus, and we expect the secular trend of enterprises wanting to automate fraud prevention and customer validation, plus a wider recovery in economic activity, to accelerate GBG's organic growth back to double-digit trend levels," said the Canadian bank, which also raised its target price on the firm from 565.0p to 870.0p.