Peel Hunt upgrades WH Smith to 'add' after results

Peel Hunt upgraded WH Smith to ‘add’ from ‘hold’ and lifted the price target to 1,680p from 1,500p following the company’s full-year results.

“WH Smith is taking full advantage of positive macro trends in Travel, continuing to find cost savings on the high street but crucially is also developing its international arm profitably,” it said, adding that cash generation has remained strong.

Peel Hunt said headline group pre-tax profit of £123m topped the average analyst estimate by £2m and its forecast by £1m.

The brokerage said the high street business continues to find cost savings and is highly cash generative, and it was possible to apply a fairly lowly multiple to the business and still come up with a sum-of-the-parts valuation nicely above the current share price.

Peel noted that management has at last given some colour on the overseas travel business. It said the numbers are generally higher than it has imagined, and it was likely that this will be a £100m sales source and a £10m EBIT generator on a two to three year view.

At 1010 BST, WH Smith shares were up 5.1% at 1,619p.