Peel Hunt gets 'excited' about InMotion deal, ups WH Smith to 'buy'

Peel Hunt upgraded WH Smith to 'buy' from 'hold' on Wednesday and bumped the target price up to 2,100p from 1,950p as it said the acquisition of US airport retailer InMotion is dial mover and highlighted "surprisingly strong" current trading.

"Our knee-jerk reaction to the InMotion (IM) deal was upbeat and, the more that we look at it strategically, the more excited we become," said Peel.

"A glance at the passengers on any form of transport suggests that two trends are rampant: athleisure and digital accessories. WH Smith is tapping into demand for the latter in the biggest travel retail market of all with this EPS-enhancing acquisition. It is the wider strategic opportunity that gets us really excited though: IM’s relationships with landlords can unlock the door to WH Smith Travel’s core format appearing in the US, and its infrastructure has capacity to help out too."

In addition, the brokerage said that InMotion is a format that will travel in WH Smith’s hands.

Peel Hunt pointed out that while the shares reacted well to the deal, they didn't re-rate. It said that after a long period "under a cloud", and with a strong current trading statement alongside the deal, that’s a "stingy" reaction.

WH Smith said on Tuesday that it was buying InMotion for $198m (£155m). It also reported that eight weeks into the current financial year, travel total revenue was up 10%, with like-for-like revenue 4% higher. Total revenue for the group was up 5% with like-for-like sales increasing by 1%.

InMotion is the largest airport-based digital accessories retailer in North America with 114 stores across 43 airports. It sells items such as headphones, travel accessories, mobile power, portable speakers and action cameras.

At 1125 GMT, the shares were up 6.7% to 1,942p.