Berenberg starts Zigup at 'buy'

(Sharecast News) - Analysts at Berenberg initiated coverage on commercial vehicle rental provider Zigup with a 550p target price and a 'buy' rating, stating the group was "in the driving seat" as it approaches a "major" inflection point.

Berenberg said Zigup, formerly known as Redde Northgate, has built a fully integrated mobility platform, providing a comprehensive solution across the full vehicle lifecycle for customers in the UK & Ireland and Spain.

The German bank stated Zigup was at "a major cash-generation inflection point", with the firm targeting �200m by FY28. It noted that financial momentum was driven by its "nationwide, unique, integrated platform", which provides "a key strategic advantage" for capturing significant market share in a fragmented industry.

"Zigup is approaching an inflection point in cash generation, driven by EBITDA growth, normalising fleet replacement capex, and the exit from a heavy investment cycle, all converging to drive a step-change in potential FCF," said Berenberg.

"Combined with �20m of restructuring savings, the business is targeting cash generation of �200m by FY28. This opens up compelling capital allocation opportunities for further investment in growth or additional shareholder returns through buybacks, in addition to a favourable dividend yield (c6.7% in FY26E)."

Berenberg added that Zigup currently trades on a FY26 price-to-earnings ratio of 7.6x, or 9.5x enterprise value to EBIT. Its 550p price target also implies roughly 35% upside to its current share price.

Reporting by Iain Gilbert at Sharecast.com