Brokers' views: Daniel Stewart & Company

In its latest Equity Perspectives analytical tome, Daniel Stewart & Co outlines a trio of tempting, AIM-traded General Financial sector picks. Analyst Simon Willis sets a 36p price target for corporate client CBG, the Manchester-based consolidator of insurance broking and financial services businesses, currently priced at 22p a share.

During the half-year to June, Willis notes, ‘CBG remained profitable in the face of particularly challenging conditions for SME insurance brokers’, while ‘measures to reduce costs and refocus strategy’ have been implemented. Forecasting improved full-year pre-tax profits of £1.1 million (2009: £1 million), he insists that CBG is ‘now well positioned to resume its growth programme when the economic background improves’.

Forecasts smashed
Also worth considering is Private & Commercial Finance (PCF), the finance house whose full-year earnings smashed forecasts with ‘profitability maintained in a tough lending environment’ thanks to some ‘robust underwriting standards’.

The broker believes PCF is ‘well placed to take advantage of an attractive lending environment, characterised by improved margins and reduced competitive pressures’. Forecasting growth in March 2011 profits to £500,000 (2010: £300,000) and earnings of 0.7p, Daniel Stewart argues that the valuation ‘appears compelling at these levels’ while highlighting a 15p target for shares presently priced at 6p.

Third is insurance and reinsurance broker THB, which over the summer cheered followers with the news that pre-tax profits had powered over 30 per cent higher to £3.1 million in the first half-year. THB, which traded strongly in October, is presently priced at 58p, a 27.5 per cent discount to the broker’s 80p price target.