Shore Capital has initiated coverage of self-invested personal pensions (SIPPs) provider Curtis Banks Group PLC (AIM:CBP) with a ‘buy’ recommendation.
The broker noted that in February of this year the company announced it had increased its SIPP annual charges by 20% “to improve the quality and visibility of the group’s revenues by materially increasing the proportion of revenue derived from its annuity-like fixed fees (currently c50% of group revenues)”.
This has significantly reduced Curtis Banks’ (CB) historic reliance on the interest income earned on client cash deposits, Shore Capital said. The broker predicts interest income will fall from around 25% of group revenue to less than 10% going forward.
“The business is highly cash-generative (>100% cash conversion), supporting a well-covered, progressive dividend. The improving quality of revenues should also translate into more predictable cash flows, which we believe should make CB more accessible as an income stock,” the broker said.
“Equipped with an increasingly diverse and robust platform for growth, and improving earnings quality and visibility, we initiate coverage with a BUY recommendation and 300p fair value,” Shore concluded.
Shares in Curtis Banks currently trade at around 250p.
