Today Mark Watson-Mitchell considers Panmure Liberum’s comments on the ‘Sum Of The Parts’ valuation of Currys and takes the view that the undervalued shares are a continuing purchase.

Currys (LON:CURY) – Worth £1.2bn but currently trading at a 24% discount to that value

It was just a year ago, this well-known electricals and electronics retailing group was advising its shareholders that it was proposing to sell off its Greek-based Kotsovolos operation.

And then a month later it was telling its shareholders that it felt as though it was showing a solid performance in a tough retail environment.

In January this year it reported that it was strengthening its performance against a continuing harsh retail scene.

It also noted that it would receive net cash proceeds of £156m from the Greek disposal.

A month later Elliott Advisers suggested it might make an Offer for the group, while JD.com also stated that it was looking at the company.

In early March Elliott backed off, JD.com also stated that there was nothing doing.

In April the Kotsovolos disposal was completed.

A month later Currys issued a Trading Update for the year ending 27th April, declaring a strong finish to the year, as well as noting that its troublesome Nordics retail operation was getting back on track again.

At the end of June the group announced its Finals, showing that its performance had continued to strengthen.

In early September the group reported an AGM Trading Update for the 17 weeks ended 24th August – declaring that it had made a positive start to the year, with market share gains and improved margins.

CEO Alex Baldock stated that:

"Trading is going well, strengthening our confidence in growing profit and free cash flow again this year.

New AI-enabled computers are bringing excitement and innovation to customers, who are coming to our stores to learn more about the technology, helping us take almost 50% share of the total laptop market.

Along with Mobile and B2B, AI product launches have contributed to an encouraging start to the year in the UK&I, as we gain market share in an improving consumer environment.

The Nordic consumer remains subdued, although we're pleased to be outperforming the market while improving gross margins and controlling costs well.

Across the Group, we're continuing to target growth in high margin, recurring revenue services and solutions. Currys is well set for our important Peak trading period and beyond."

The next report from the group is due to be the Interim Results announcement, due on Thursday 12th December.

Latest Analyst Views

Yesterday, Wayne Brown and Anubhav Malhotra at Panmure Liberum published a Buy note on the group, with its shares as a Buy, looking for 135p as their Price Objective.

They comment on values of various parts of the group, as it moves forward.

They value the Nordic operation at between £700m to £800m based on depressed multiples and earnings.

The ID Mobile side of the group could be worth £360m.

They also note that the group, following the Greek cash sale, had around £96m in the bank at the end of FY24.

Their current year estimates to end-April 2025 are for slightly lower sales at £8.37bn (£8.48bn), but with higher pre-tax profits at £130.2m (£118.0m), generating 8.7p (7.9p) in earnings per share.

For the coming year they see £8.54bn sales, £155.1m profits and 10.3p earnings per share.

The year to end April 2027, the analysts compute, could see £8.71bn turnover, £178.2m profits and earnings of 11.9p per share.

On their assumptions, it is fairly easily observed why they put a 135p valuation on the group’s shares.

My View

Despite today’s gory Budget details, I still expect the British public to look forward to a present-giving Christmas period – and Currys will, undoubtedly, be a recipient of such spending.

Six months ago, 10th April, I wrote in Master Investor:

“Have you noticed the gradually increasing share price of Currys (LON:CURY), now at 63.25p, after having dipped to 55p three weeks ago.

They touched 72.45p at the end of February as the possible bid situation was stirring the waters.”

At the end of last month, the shares hit 90p but have subsequently slipped back to the current 84.70p level, at which the whole group is only capitalised at £968m.

I take the view that there is a Christmas Bonus for investors now buying into Currys equity.

(Profile 10.07.23 @ 49p set a Target Price of 61p*)

(Asterisks * denote that Target Prices have been achieved since Profile publication)