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WH Smith's prospects in year ahead look good, says Deutsche

Prospects for High street chain WH Smith (LON:SMWH) in the year ahead look very good, says Deutsche bank, which rates the stock a 'buy' and has upped its price target for the shares by 80 pence to 650 pence.

It comes after what the broker called a "solid" pre-close update from the firm yesterday. It reports results for the year to August 31 in October.

This has led to a 2 per cent increase to Deutsche's pre-tax profit forecast for the full year to £101 million, noted analyst Warwick Okines.

"In our view, August 2013 forecasts of £104 million (was £103mln) are well underpinned and our 10 per cent EPS growth forecast looks conservative," the analyst added.

He said the group had a very clear strategy which was set to continue.

"WH Smith's strategy of growing travel (in UK and International) and defending High Street profits (through cost and space mix management) supplemented by generous dividend and share buybacks, has been very consistent over the years."

Deutsche has rated WH Smith a 'buy' since December 2007.

One key downside risk is if the downturn in passenger travel is prolonged, Okines noted.

Earlier this month, broker Seymour Pierce said the firm was highly cash generative, was being undervalued by the market and it should be a core holding for investors.

It issued a bullish note to its clients, with a ‘buy’ rating and a 670p price target.

Shares in WH Smith were up 0.08 per cent, to stand at 598 pence.


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