A recent report from Bell Potter has forecast significant potential gains for ASX-listed financial services company COG Financial Services Ltd (ASX: COG). COG Financial Services is an Australian-focused group of distribution businesses.

It facilitates access to credit and related insurance for commercial assets via a broker network and holds balance sheet capacity to fund direct originations, capturing some overflow in non-prime chattel mortgages.

The 2023 acquisition of Paywise signaled a change in its expansion and capital recycling strategy, placing greater strategic emphasis on novated leasing.

Its share price has declined 30% year-to-date, yet Bell Potter anticipates a strong rebound over the next 12 months.

Performance of Novated Leasing

Bell Potter noted that June was a record month for novated lease vehicle sales.

Private buyers increased by 11% and business buyers by 6%, despite persistently high interest rates.

Some of this strength stems from typical seasonal price reductions, but car manufacturers also offered additional discounts through specific sales channels.

Bell Potter expects the company to express optimism about this segment, as electric vehicles' share of sales surged from 10% to 24%, marketing campaigns are proving effective, and BYD is offering new cashback deals for specific orders placed in July and delivered by August.

In summary, driven by EV demand and promotional discounts, the company's novated car-leasing business appears robust heading into its results.

Broking Segment Outlook

The Bell Potter report stated that ABS data on business investment will not be released before COG reports its results.

Consequently, Bell Potter's assessment is based on the broader weak economy and high interest rates, which are expected to pressure the broking side of the business.

Small business confidence remains poor, having dropped sharply in March with minimal recovery since. Business investment plans reached a record low in April.

Furthermore, profit margins on loans continue to compress even as loan volumes rise, increasing the operational costs for this business segment.

Significant Upside Potential Remains

Despite the mixed outlook, recent share price weakness makes this ASX financial stock an attractive opportunity.

Bell Potter has maintained its buy recommendation and set an updated price target of $2.10.

Based on yesterday's closing price of $1.425, this implies an upside potential of 47%.

The recent government commitment has extended the adjustment for electric vehicles and made this measure permanent. This is viewed as a multi-year outcome, further enhanced through successful tendering.