Investec Securities gave a boost to books and newspapers retailer WH Smith PLC (LON:SMWH) today, upgrading its rating to ‘buy’ from ‘hold’ on expectations for its Travel division, which runs outlets in airports and stations.
The broker also raised its target price for the retailer’s shares to 1,900p from 1, 550p.
In early morning trading, WH Smith shares topped the FTSE 250 leader board, up over 3.5%, or 62p at 1,683p.
In a note to clients, Investec analyst Kate Calvert said: “With Travel now accounting for 58% of EBIT (FY16) and 25% of its Travel outlets based internationally, we believe WH Smith’s equity story is evolving into a play on a structurally growing Global Travel market.”
She added: “In five years, Travel could contribute c.70% to Group profits.
“We believe WH Smith is set to see an increase in its sustainable growth rate, helped by a higher proportion of directly run outlets. This should drive a higher rating.”
The analyst said: “Our in-depth analysis of WH Smith’s International portfolio and historic development shows that it has gained critical mass in several major geographies, such as the Middle East and Australia.
“The company is starting to have its early contract wins renewed and has recently won a number of ‘game changing’ contracts (Germany and Spain), which opens up the European Travel market. It has also won 10 units in Singapore, the 6th busiest International airport in the world.”