Bookseller and stationer WHSmith is undervalued and deserves to be classed alongside retailers such as Next, SuperGroup and Dunelm Mill, broker Oriel believes.
Oriel analyst Jonathan Pritchard said WHSmith’s travel division delivered a “straightforward growth story” similar to SuperGroup or Dunelm Mill, and a “straightforward income story” like Next. He added a demerger of the travel and high street operations was possible.
The broker noted: “Next has demonstrated that the mantra of ‘sales for vanity, profit for sanity’ can deliver shareholder returns and WHSmith should be regarded as a similar animal.
“If we apply a Dunelm Mill multiple to travel and half the Next multiple - surely harsh - to the high street earnings, we end up with a share price in excess of 580p. Demerger or not, there’s huge value here.”
Oriel rates WHSmith a buy and has a price target of 464p.
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