Source: Sharecast
Canaccord Genuity nudged its underlying pre-tax forecasts 0%-2% higher for FY25-27 and upgraded its underlying diluted earnings per share estimates by 2%-3%, accounting for an additional £50.0m share buyback, which Paragon announced alongside its results.
The Canadian bank also noted that a decision from the Supreme Court on "hidden commissions" in motor finance could be imminent, with July being suggested by the Court. In H125, Paragon took a provision of £6.5m related to motor finance commissions liabilities and while Canaccord Genuity noted that it was difficult for it to judge whether this was adequate based on available information, it cautioned that "the first provision is not usually the last".
"However, we note that the provision relative to the size of the motor net loan book appears to be within the peer group range," said Canaccord, which reiterated its 'buy' rating on the stock. "PAG previously disclosed that with respect to 'hidden commissions', which is the subject of the current Supreme Court review, between 2014 to Sep 24 it paid £9.0m of commission to broker-dealers (the subject of the case), just 18% of the total £49.0m motor commissions it paid."
Canaccord said its new target price makes further allowance for potential liability concerning motor finance commissions significantly above the provision already taken, implying 9% upside and a total shareholder return of 14%.
Reporting by Iain Gilbert at Sharecast.com