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

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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 GBP20mln 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 GBP300mln”.


“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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