Source: Sharecast
The bank said Currys’ recent 15% share price fall means that it now sits around 45% below pre-Covid levels, and at similar levels to March 2020, when the pandemic first struck.
"This is despite a much stronger financial position, the run of recent upgrades and an increasingly optimistic outlook driven by self-help and structural tailwinds," it said.
"The circa 8.5x price-to-earnings gives little credit for any earnings upside and is a 48% discount to peers."
Berenberg said one can argue that the combined value of Currys’ services revenue - around £700m of recurring, higher-margin, cash-generative sales - and its iD Mobile network is worth more than the current entire group market cap.
The bank said it expects its unchanged discounted cash flow-based target price of 125p to prove prudent over the medium term.
Berenberg rates Currys at ‘buy’.
CVS Group surged on Monday after RBC Capital Markets upgraded the shares to ‘outperform’ from ‘sector perform’ on forthcoming clarity from the Competition and Markets Authority and Australian margins, and hiked the price target to 1,500p from 940p.
"Our analysis of practice margins in Australia highlights their accretive nature, which we think is not well understood by investors," it said. "Additionally, we are now close to gaining clarity on potential CMA investigation outcomes, which could stimulate buying interest in light of continued compressed multiples."
RBC said that although consensus needs to update its non-operating cost assumptions, and despite a tough consumer environment, it believes that greater confidence around the CMA will enable investors to price in the strong industry fundamentals and the high Australia practice margins.
RBC noted that Australia margins were very strong, even before synergies. It said EBITDA margins in the 2024 and H1 2025 cohort of acquisitions are over 30%, versus a UK margin it estimates to be around 19%.
"Additionally, the company is seeing opportunities to drive cost synergies from greater purchasing power earlier than expected," it said. "This could add a few more percentage points to Australia margins over the next few years, driving group revenues and margins comfortably ahead of consensus."
Additionally, the bank said the EBITDA multiple paid by CVS is in the low-7s, implying substantial return on capital employed even before delivery of these synergies.
RBC pointed out that the CMA is due to publish more working papers in Spring that will include one on possible remedies.
"This will be the first insight into how the CMA is thinking about concluding its investigation. The provisional decision report will be published in May-June, and the final report is due Sep-Oct," it said.
