Source: Sharecast
The bank noted that Close Bros has had a bad run, leaving the shares trading at 0.4x TBV, with lack of cost control being a significant driver of falling earnings expectations.
"We expect CBG to start to correct this from September," it said.
"By FY27 we are 2% more optimistic on costs versus consensus, and 8% ahead on an adjusted profit before tax basis."
RBC, which reiterated its ‘outperform’, speculative risk rating, also said it was more optimistic on a favourable outcome from motor finance.
"The Supreme Court will decide in July how at fault CBG is in relation to motor finance commissions," it noted.
"For CBG, we model an impact of circa £250m (adj. cons c.£280m)."
RBC said that following its roadshow with Julius Grower, an equity lawyer specialising in commercial law, it is more optimistic of a favourable outcome for UK banks and thus has lowered its cost of equity for CBG by 2 percentage points.
"If the SC concludes that there is only liability under the Consumer Credit Act, this will allow the regulator to set up a scheme which focusses solely on egregious commissions," it added.
Elsewhere, Berenberg initiated coverage of GB Group with a ‘buy’ rating and 340p price target.
GB Group (GBG) operates in the identity verification, fraud prevention and location intelligence markets.
Berenberg said the company's cloud-native software uses data obtained from hundreds of providers to help businesses verify the location, identity, credentials and legitimacy of individuals.
"GBG has a long track record of organic and acquisition-driven growth, and was a significant beneficiary of the changes in consumer behaviour during the Covid-19 pandemic," it said.
"However, the business has since struggled to return to material growth, with its share price still down 70% from its October 2021 peak.
"While GBG's H225 was slightly weaker than anticipated, we have reviewed its growth credentials and think the recent product developments and ongoing reworking of its go-to-market strategy provide the potential for improvements to its organic growth rate and margins."
