We note yesterday's fall in the share price, which pulled back close to the levels at the time of the AGM. The AGM update was very upbeat and potentially signalled overly conservative forecast assumptions. In our view the fall is overdone given significant strategic advances at the company over 2 years, and unassailable barriers to entry in terms of its physical remarketing and data platform. Market nerves around residual pricing risk are misplaced; BCA is price agnostic and historically defensive. Indeed movements in residual price can, and recently did, drive additional remarketing volumes to which BCA’s success is actually linked. As detailed in earlier research, there are several structural forces at play which are increasing volumes through exchanges, especially the market leader BCA. We expect the interims on 30 Nov to vindicate the key points of our Buy stance which we presented in our preview note dated 15 Sept. In essence several variables could facilitate stronger growth than the market currently forecasts, e.g. higher volumes, take-up of add-on services and related profits, and benefits of operational leverage. The move to a Premium listing on Monday will also mark a key milestone and pave the way to FTSE250 inclusion in Dec. Having fallen 30% below our recently increased target price, we argue the fall offers an excellent entry point.
