Currys has major upside after European disposal, says Liberum

Liberum has reiterated its 'buy' recommendation on Currys, saying that the €200m sale price of its Greek and Cypriot operations is an "excellent outcome" for the consumer electronics retailer.

The broker said the deal, which Currys announced on Friday would allow it to pay down debt, reduce its pension deficit and focus on its core operations in the UK, Ireland and Nordics regions, "should be very well received" by the market.

"It would mean the group is effectively selling 7% of total sales to bring in net proceeds amounting to c.30% of the current market cap," Liberum said.

The Kotsovolos sale price, of £175m, is expected to net out at £156m after fees, separation costs and intercompany balances, and should result in a net cash position of around £50m by the end of the financial year to April 2024, compared with a net debt position of £97m at the end of the last financial year.

This "should help put to bed any lingering concerns around the balance sheet", Liberum said.

The broker pointed out that the implied enterprise value (EV) of Kotsovolos of £260m, which includes leases, represents an EV-to-EBIT ratio of 14, higher than the wider Currys business which trades at just 9.5.

"If one were to assume the remaining UK&I and Nordics operations re-rate to 14x, then based on FY24E consensus EBIT (which remains very depressed for the Nordics), this suggests a potential more than doubling of the share price."

Liberum has a 135p target price for the stock, which stood at just 47.85p on Friday morning, up 4% on the day.