Mike Ashley’s retail group has made an improved offer as an auction process is being finalised by Lazard, according to a report in The Times.
Debenhams latest collapse into administration came in April and the department store retail was again subject to the acquisitive interests of Frasers.
Stockbroker Liberum, in a note, highlighted that Frasers is evolving into a diversified ‘house of brands’.
Analyst Wayne Brown noted that Frasers’ elevation strategy is driving an increasingly premium offering across fashion, sports and lifestyle.
Brown forecasts earnings growth of around 10% supported by a growing market and overlapping customer demographics across its brands.
“We forecast EBITDA to rise GBP107mln between FY20-FY23E,” Brown said in a note.
“We show that nearly all of this could be achieved through cost synergies on recent M&A, including a c.GBP50mln positive swing for House of Fraser.
“It means little growth in wider sports retail would be needed to hit our numbers.”
“We expect FCF of c.GBP150m+ p.a. from FY21E, as EBITDA grows and stock efficiencies flow via warehouse automation. Strong cash flows give investment firepower to drive the elevation strategy (incl. GBP100m into digital), de-lever the already healthy balance and pursue further M&A.”
Liberum rates Frasers as a ‘buy’ with a 550p target (current price: 360p).