- Currys
- 23 September 2024 09:03:49
Source: Sharecast
The bank noted that Currys' share price sits about 45% below pre-Covid levels despite its stronger financial position and an increasingly optimistic outlook.
"The FY 2025 estimated price-to-earnings ratio of 8.2x gives no credit for earnings upside from here and represents a circa 40% discount versus major direct peers," it said.
"It is arguable that the combined value of Currys' services revenue (circa £700m of recurring, higher-margin sales) and its iD Mobile network (over 1.9m subscribers and up by 34% year-on-year) alone accounts for the entire current group market cap."
Berenberg noted that Currys' turnaround plan has cut total indebtedness by more than £700m over FY 2019-24 and delivered April 2024 year-end net cash of £96m.
"This financial discipline, a clear strategy and right-sized cost base, will continue to support normalised capex levels to drive growth," it said. "At the same time, we forecast the pension deficit to be eliminated in FY 2027E, at which point contributions cease."
The bank said this will drive a step-up in free cash flow to equity to circa £100m in FY27E and over £150m per annum thereafter.
"All of this can be achieved while maintaining a growing net cash balance sheet, which has already given management confidence to announce a resumption of dividends in the current financial year.
"While we wait until the dividend is declared, we see scope for a yield of c4% to appeal to income investors."
Berenberg rates shares of the electricals retailer at ‘buy’.
At 0900 BST, the shares were up 4.9% at 82.20p.