Panmure Liberum thinks the rebooted Debenhams business could be worth as much as £1 billion in equity value.
It is an eye-catching claim for a group whose shares, still changing as Boohoo Group PLC (AIM:DEBS), closed rose a further 3% to 23.7p on Monday after jumping more than 120% last week on the back of a stellar update on trading.
Still, even at these elevated levels, the company is worth only £320 million, around a third of the way along the road to £1 billion.
The Panmure note sets out two broad drivers for the envisaged revival.
The first is a shift in the operating model that supports much higher free cash flow. The broker believes the business could generate £41 million of free cash flow within the next couple of years, more than four times the £9 million it currently forecasts for FY27.
The building blocks are straightforward enough: removing around £7 million of rent costs by reassigning the group’s mothballed US distribution centre, further savings of £4-7 million from office consolidation in Manchester and a rise in marketplace sales, which require far less stock and carry higher margins.
These changes push the company away from a stock-heavy retail model and towards a commission-based one. That tends to lift gross margin and reduce working capital demands.
The second driver is a set of one-off balance-sheet events that could move the needle quickly. The Burnley distribution centre could raise £30-40 million if sold.
There is also the ongoing sale process for PrettyLittleThing (PLT). Using the sale of Topshop as a rough guide, PLT could fetch £200 million.
Panmure uses a more conservative £100 million in its scenario analysis, but still shows that net debt could swing to net cash rapidly. Depending on disposal proceeds, that could lift the equity value by 40–70% relative to today’s share price.
What makes this more than a blue-sky exercise is that several of these levers are already pulling through the numbers.
Recent results helped drive the aforementioned leap in the share price, aided by improving gross merchandise value (GMV) trends and stabilising youth fashion brands.
The analysts also highlight other potential boosts not in their central case, including refinancing a £175 million facility that currently carries a near-11% interest rate, faster recovery in the group’s fashion labels and any strategic interest in Karen Millen, which they estimate could be worth £50-75 million.
Even without those extras, Panmure argues that a business producing £41 million of free cash flow would look mispriced on a market cap of £320 million.
At that level, the implied free cash flow yield is 12.7%. A re-rating towards 4–5%, more typical of scalable marketplace models, would push the equity value into the £800 million to £1 billion range. That thinking underpins the broker’s new 60p target price, up from 35p.