LONDON (ShareCast) - (Sharecast News) - Analysts at Liberum initiated coverage on bakery chain Cake Box on Tuesday, hitting the group with a 250.0p target price and a 'buy' rating.

Liberum said Cake Box benefits from being fully franchised, providing it with a capital-light rollout model that will earn it double rates of growth every year for "at least the next five".

Wayne Brown and his team of analysts said Liberum, which was led by its founders and has a proven track-record of expansion, was also blessed with a scalable model and infrastructure able to accommodate a tripling of its estate.

"Cake Box benefits from high growth, which is all funded by its franchisees. A strong working capital profile and limited need for capex means the group generates a ROCE >60% and earns more cash than it needs," said Liberum.

Liberum also said that limited competition and being the only national operator of scale gave Cake Box a "strong market position".

"While barriers to entry are low, we see brand awareness rising from continued expansion. We see numerous positive catalysts from new product adjacencies, routes to market, and channels over time," added the analysts.

"The current valuation does not reflect the quality of the business."

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