At the start of this month the shares of the electrical and technology retail group Currys (LON:CURY) were trading just above the 83p level.
Then the big shake-up in the Tokyo and subsequently the global markets hit prices on Monday of last week, with the shares dropping to 71.60p at one point.
Last night, with the markets generally looking a little more settled, they closed at 80p after touching 80.55p during the day.
We all know that players in the market like ‘active’ stocks and this one is pricing to be just that.
However, I take the view that canny, patient investors should use such market pullbacks as an excellent opportunity to load up their portfolios with undervalued growth situations – and that is just what Currys is, as far as I am concerned.
The Business
The group is a leading omnichannel retailer of technology products and services, operating through online and 727 stores in 6 countries.
In the UK and Ireland, it trades as Currys both online and through some 300 stores, and has a 23% market share, while in the Nordics it goes under the Elkjøp brand, with about 420 stores, and a 27% market share.
In each of those markets it is the market leader, employing some 25,000 people in total.
The group’s operations are supported by a sourcing office in Hong Kong, by a ‘state-of-the-art’ repair facility and an extensive distribution network, which enable fast and efficient delivery to stores and homes.
In the last few years, the business has undergone quite a transformational recovery in both its operations and its balance sheet, helped significantly by the disposal of its Greek retail side earlier this year.
In three weeks (Thursday 5th September) the group will be holding its AGM at the Hilton Hotel in Kensington and issuing its latest Trading Update, which market observers suggest will be quite bullish in content.
It is expected to cover a period since the finals were announced including significant sporting events, which should have helped lift TV, tablet and mobile sales in both its stores and online.
Analyst Views
Deutsche Bank last month upgraded their recommendation on the group’s shares from Hold to Buy, increasing its Price Objective to 95p (80p).
Barclays has also upped its PO to 74p (67p) but with an ‘equal weight’ view.
Out of some 9 analysts following the group, the consensus view is that the shares are a Buy, with 65p being the lowest PO, while 135p is the highest aim.
The average comes out at 96.50p.
However, the latest research from Panmure Liberum analysts Wayne Brown and Anubhav Malhotra is what I heed most of all.
They rate the group’s shares as a Buy, looking for 135p.
Their estimates for the financial year to end April 2025 are for £8,374m (£8,476m) revenues while pre-tax profits could rise to £130.2m (£118.0m) taking earnings up to 8.7p (7.9p) per share.
For the coming year the analysts go for £8,541m sales, £155.1m profits and 10.3p per share of earnings.
Leaping forward to the end-April 2027 year, they estimate £8,712m turnover, £178.2m profits and 11.9p of earnings.
In My View
These shares are totally undervalued, which undoubtedly was why the Private Equity guys were nosing around earlier this year – with Elliott Management having made and unsolicited bid, which was firmly rejected by the group.
Also in the frame was a strong interest from the Chinese e-commerce company JD.com.
At just 80p the shares have very attractive upside potential, with bid possibilities thrown in for free.