Barclays starts Safecharge at 'equalweight', sees value in the longer term
Analysts at Barclays Research started coverage of Safecharge at 'equalweight' with a 310p target price, telling clients the company's move to reduce its risk profile would continue to weigh on earnings.
However, in the longer-term the broker's analysts said they saw value in the shares.
Over the past year and a half, the payment services provider had chosen to exit binary options and adult content, so as to significantly improve the risk profile of its back book.
That had cost it an annualised $11m of sales and about $7m of profits before tax, but the firm should now be concluding a two-year period of no growth in profits, Barclays explained.
Indeed, the broker now expected the company's key metrics to begin improving starting from the backhalf of 2017, resulting in a 7% compound annual rate of growth in the firm's adjusted earnings per share to 2019.
Barclays also pointed out three potential upside catalysts for the share price, including the ongoing sector consolidation and opportunities for acquistions, a sell-down by its majority shareholder Teddy Sagi and a return to historical growth rates once it was doen cleaning up its client base.