There is a bit of a renewed buzz in the market concerning the shares of technology products retail group Currys (LON:CURY).
They put on a clear 7.21% gain yesterday, closing up 5.15p at 76.60p, after a massive 7.68m shares were traded.
The sparking of interest came after broker Berenberg upgraded its view of the group’s shares, switching from Hold to Buy, while at the same time lifting its Price Objective from 67p to 90p.
Other City analysts have even higher aspirations for the shares.
Recovery Is Expected
And the reasons are based upon the way the leading omnichannel retailer of electrical products and services is recovering its trading poise.
That was clearly indicated in the middle of May when the group issued a Trading Update for the year to 27th April 2024, giving the market a guidance that its full year adjusted pre-tax profits will be at least £10m higher than expected coming in the range of £115m-£120m.
The Update suggested that its end of year net cash position will be at some £95m, which compares to the current market value of £868m.
The Business Now
Following the disposal of its Greek interests in April the group is left operating online and through 720 stores in some 6 countries, being the market leader in all of its markets.
In the UK it also operates iD Mobile, its own mobile virtual network, which is a business many of the City whisperers suggest should be either sold off or floated as a separate entity, which could almost double the whole group’s value.
Analyst Comments
Berenberg notes that the group’s improving sales momentum, its expansion of market share and its presence within a significantly depressed, highly discretionary segment of domestic retail, makes it well placed to benefit from a near-term rebound in demand.
“Despite a record of building sales momentum and UK end-market dynamics that are well suited for demand recovery, Currys trades on a significant discount to peers. We expect this discount to diminish as trading momentum continues, indebtedness reduces further and growth accelerates.”
Over at Liberum Capital its analysts applaud the disposal of the Greek stores and its management’s attention to the other parts of its whole business.
Sector specialist Adam Tomlinson concludes that the current valuation remains far too cheap, giving no credit for any further earnings upside even as momentum now turns positive and ahead of macro signs improving.
Management Comment
At the time of its latest Trading Update, its third upgrade in the last year, CEO Alex Baldock stated that:
“Our performance is strengthening, with good momentum in the UK&I, and with the Nordics getting back on track.
Sales are now growing again, margins are benefiting from higher customer adoption of solutions and services, and cost discipline is good.
All this means improved profits and, with our strong cash position, we’re well set up for the year ahead.”
Between now and Thursday 27th June, when the full year results are due to be published, market views infer that further price rises can be expected.
