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WH Smith sale of Funky Pigeon could boost pivot to travel business, says broker


WH Smith PLC (LON:SMWH) selling its Funky Pigeon online gift card business could help it fund its ambitions to become a bigger player in the travel sector, according to analysts at Peel Hunt.

In a note on Tuesday, the broker, which rates WH Smith at ‘buy’ with a 2,000p target price, said the disposal of Funky Pigeon, which is “non-core” to the wider firm, will give Smith’s “a chance to get back onto a deal-making front foot”.

READ: WH Smith expects monthly cash burn of up to £20mln if restrictions continue to March

Peel Hunt’s analysts also predicted that, based on the numbers from sector peer Moonpig Group PLC (LON:MOON), that Funky Pigeon “will have seen extremely good sales and EBITDA growth through the [coronavirus] crisis” and forecast the business could be worth “well in excess of £300mln”.

“That, coincidentally, would wipe out WH Smith’s net debt”, Peel Hunt said, adding that such a move will provide a “step change” for the business that they said is currently “heavily indebted”.

“Arguably there will never be a better time to move [Funky Pigeo] on and use the funds to create Travel value”, the broker said.

As for a buyer, Peel Hunt said private equity “would be an obvious home” for Funky Pigeon, however, they also posited that Moonpig itself could also put in a bid.

“Looking at the shares of the overall greetings card market, it’s surely possible”, they said.

Shares in WH Smith were down 2.6% at 1,694p in lunchtime trading.

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