Carphone Warehouse has received a boost from analysts ahead of its half year results next Wednesday.
There is the prospect of a more positive outlook, with the arrival of the iPhone 5 in September likely to help the group's revenues for the rest of the year.
But analysts have also looked at the prospect of Carphone buying out the stake in its European joint venture currently held by partner Best Buy. With the US group facing a possible buyout by former chairman Richard Schulze, there is a chance the CPW Europe stake could be sold to raise cash. It is currently valued at some £550m.
Richard Chamberlain at Bank of America Merrill Lynch - who moved his rating from underperform to neutral with an 185p target - said:
Under a change of control, Carphone has the right to buy the rest of CPW Europe at a 10% discount to fair value...Depending on how Carphone finances the potential buyout, this could be 30%-50% accretive to earnings, based on our estimates, depending on the implied cost of financing.
We estimate Carphone already has around £200m of cash and property and so gaining access to additional acquisition finance, likely 3-4 year money, should not be a problem. And any equity issue, backed by Carphone founders who still have around 40% of the shares, would most likely be small as Carphone would not want to dilute its equity too much knowing that it may be able to raise finance in one to two years from selling its stake in Virgin Mobile France.
Meanwhile UBS analyst Andrew Hughes raised his target price from 170p to 190p:
Best Buy holds an investor day next week, and [Schulze] has to announce his plans for acquiring Best Buy by the end of November. If Carphone could acquire the other 50% of CPW Europe for cash at our valuation, we estimate pro forma earnings per share would rise c40%. Even with £250m equity issuance, we estimate the uplift would be over 20%.
Carphone's shares are currently steady at 174.25p.
