Secondary Recommendation

Carphone Warehouse - De-merger plans should stimulate re-rating

January 2010

Investing in shares may lose you all or some of your money. Past performance is no indication of future performance. Some of the shares recommended here may be small company shares, which can be relatively illiquid and hard to trade and this makes such shares more risky than other investments.

When a company is trading at a substantial discount to its break-up value one option on the table is to demerge its two main parts on the basis that each will enjoy a much higher PE rating as a stand alone entity. This is exactly what mobile phone retailer and broadband giant Carphone Warehouse is undergoing at the moment, with the company confirming that a de-merger will be completed by the end of March. While this alone should act as a catalyst for a strong share price performance in 2010, the exciting thing is that this is coinciding with very strong trading, with its first half results leading to a round of upgrades to forecasts. Carphone is best known for its chain of mobile phone stores. The Carphone formula is predicated on ...

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With small companies there is an above average degree of risk compared to buying blue chips. Please be aware that we have not assessed the suitability of any of these investments for you. The newsletter simply states a personal view and diarises the editor’s investment decisions. Please speak to your stockbroker or other qualified individual to ascertain whether any of these companies mentioned would form useful additions to your own portfolios. Past performance is no indication of future success.

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