I'm sure most income investors dream of finding an ASX share with a big dividend yield and even bigger upside.
Well, Bell Potter thinks it has identified one this week.
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Which ASX share?
This morning, Bell Potter has initiated coverage on Cash Converters International Ltd (ASX: CCV).
It provides unsecured lending and second-hand retail services in Australia, New Zealand, the United Kingdom, and other international markets.
At the last count, it was operating through a network of 197 corporate owned stores and 459 franchised stores.
Bell Potter is feeling positive on the company's global growth outlook and highlights its better-quality loan book as a reason to be bullish. It said:
CCV has embarked on an aggressive acquisition strategy, having bought back 120 franchises since FY21 across ANZ and the UK, with the company now controlling ~30% of the global Cash Converters branded store network. Each acquisition is accretive to the group, and we expect ~17 new store additions in the near-to-medium term (UK weighted) to add ~$5.3m in EBITDA pre-operational improvements, and a pipeline of 176 further global acquisitions identified, with management flagging Europe as the next expansion region.
The introduction of the new line-of-credit Cashies loan is progressively reshaping CCV's loan book towards stronger credit quality customers, resulting in lower bad debt expense and improving Net Interest Margin's (NIM), with the run-down loan book to be completed over the next 24-36 months.
Initiated with a buy rating
According to the note, the broker has initiated coverage on the ASX share with a buy rating and 34 cents price target.
Based on its current share price of 30 cents, this implies potential upside of 13% for investors over the next 12 months.
In addition, Bell Potter is forecasting fully franked dividends of 2 cents per share in FY 2026 and through to FY 2028. This equates to dividend yields of approximately 6.7%.
Commenting on its buy recommendation, the broker said:
We view CCV's scale, global brand recognition and acquisition pipeline as competitive advantages that position its retail business to capitalise on growing demand for second-hand goods, supported by cost-of-living pressures and increasing consumer appreciation of the circular economy.
In consumer lending, we view the wind-down of legacy, lower-quality loan books as prudent, as it shifts portfolio exposure towards higher-quality borrowers with lower loss profiles and stronger margins, particularly as improved loan book quality supports a reduction in funding costs.
