MIDAS SHARE TIPS UPDATE: Zigup keeps expats in charge

Spain is the UK’s favourite tourist destination, with almost 300,000 Britons packing their bags permanently and thousands more fluttering back and forth.

These second home owners will stay in their sunny paradise for anywhere from a few weeks to a few months.

Some choose to keep a car permanently on location. Others prefer more flexibility. Zigup from Darlington offers exactly what you are looking for for these frequent travelers: competitively priced long-term rental cars.

As vacation homes become increasingly popular, the market is in the right place at the right time and demand is growing rapidly.

Zigup was known as Redde Northgate before changing its name earlier this year. While the rebranding may not be everyone’s cup of tea, there are no objections to the company itself.

Zigup is a leading player in the UK rental market, renting vans and cars to businesses from large corporations to sole traders.

It also has a thriving division in Spain and has been selling cars directly to consumers for the past three years, as CEO Martin Ward searches for new avenues of growth and profit. His search is paying off.

Revenue rose 14 per cent to £1.5bn for the year to April 30. Profits rose almost 9 per cent to £181m and the dividend rose 7.5 per cent to 25.8p.

With Zigup shares trading at £3.90, the stock has an attractive yield of over 6.5 per cent, with the potential for this to rise further.

Traditionally, companies would own their own fleet of vehicles or vans, but today, rental is becoming more popular.

The upfront costs are lower and Zigup offers a range of additional benefits, from service and maintenance to replacement vehicles in the event of accidents. Demand is growing here and in Spain and the outlook is good.

Zigup also has a thriving insurance business and helps motorists after accidents: it collects cars that can no longer be driven, repairs them and delivers new cars while the damaged engines are off the road.

Customers include Admiral, Saga and Tesco. The division grew by almost 20 percent last year and provides accident support to 20 million motorists, around half the UK market.

That number is expected to increase further over the next three years as the group adds new insurance customers.

Brokers expect continued growth in revenue and underlying earnings, with the dividend expected to rise to 27p this financial year and more than 28p in 2026.

MIDAS RATE: Midas recommended Zigup in October of last year. Since then, shares have risen 26 percent.

Performance has been strong, but the stock is cheap compared to its peers, the dividend is attractive and there should be more. Existing shareholders should stick with the company. New investors could also choose to buy a few at £3.90 per share.