LIVE MARKETS-European travel retail: ripe for consolidation

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EUROPEAN TRAVEL RETAIL: RIPE FOR CONSOLIDATION

Swiss travel retailer Avolta AVOL.S is reportedly in the crosshairs of private equity, and analysts at RBC Capital Markets believe they might not be the only company being eyed in the space for a possible buyout.

"Travel Retail has seen substantial M&A activity historically," RBC writes.

"We expect the sector to continue to see consolidation interest. Travel Retail offers exposure to captive markets, visibility on cashflows given long term contracts and downside protection given turnover based leases."

RBC also believes the sector will continue to grow ahead of GDP, while market caps remain below pre-COVID levels.

"The caveat is that travel can be vulnerable to geopolitical risk and demand shocks," they add.

Looking at possible targets, RBC notes that they expect SSP's SSPG.L earnings to have now troughed and that its valuation is on the lower side of its long-term history.

Meanwhile WH Smith SMWH.L, which has recently announced plans to sell its high street business and focus on travel retail, could also attract interest.

"We think its strategic attractions to an acquirer have increased recently, and its valuation ... is undemanding," RBC says.

(Samuel Indyk)

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