Fears about the impact of the growing popularity of e-books on bookseller and stationer WHSmith are overplayed and the retailer is undervalued, according to broker Oriel Securities.

Oriel analyst Jonathan Pritchard pointed out that e-readers account for 1% of the total UK book market and argued: “Observers are overly concerned with the rise of e-books and its potential to derail EBIT. The average WHSmith shopper only buys three books a year, so downloading ability/reading devices are not high on these customers’ agendas. Even making the most extreme assumptions, just 9% of group EBIT is at risk from this source.”

He also said that WHSmith’s travel division’s prospects are insufficiently appreciated.

Pritchard argued: “It has potential to grow strongly from its existing domestic base and the overseas opportunity is huge.

“It is realistic to expect a step change in the overseas store base from 24 to about 250 stores over the next three to five years.”

The broker was especially interested in the potential of India, where UK retailers such as Mothercare have done well.

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