How a potential demerger could deliver a 10% upside for this ASX 200 stock

Investors might have even more reasons to love this ASX 200 stock if rumours are true.

| More on:
a woman with lots of shopping bags looks upwards towards the sky as if she is pondering something.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

There's an ASX 200 stock that (unless you're a shareholder) you might think has had its fair share of upside. After all, this company has given investors a 7.76% gain over 2024 to date, as well as a 17.8% increase in share price over the past 12 months.

Over five years, those gains stretch to 85.2%, which doesn't even include the substantial boost from dividends either.

The ASX 200 stock in question is none other than retail share Premier Investments Limited (ASX: PMV). If you don't know Premier Investments, chances are you'd be familiar with at least one of this company's many lucrative retail brands. They include Peter Alexander, Dotti, Jacqui E, Smiggle, Just Jeans and Jay Jays.

So we've already established that this company has been a real winner for ASX 200 stock market investors over a long period of time. But shareholders could be treated to even higher gains in the future, if a report is to be believed.

Could this ASX 200 stock be heading for a breakup?

According to The Australian, Jarden analysts believe that a current strategic review of the Premier Investments business structure will either lead to "no change in the current structure, a demerger of the Smiggle and/or Peter Alexander, or a demerger of its core fashion brands".

The analysts went on to argue that "the sale or equity swap for the core apparel brands (which include
Smiggle and Peter Alexander) could deliver the most potential upside, particularly if synergies existed for an appropriate buyer".

Jarden was coy on just how much this might be worth to investors. But the report also cited analysis from Unified Capital Partners from 2023. This also found that a demerger could unlock additional value for shareholders of this ASX 200 stock.

That's based on the assumption that Smiggle could have a value of more than $1.1 billion on its own, with Peter Alexander being worth another $1.5 billion.

If these businesses were spun out, Unified Capital Partners estimated that combined, Premier and the demerged company would have a value of around $33.46 per share. Premier was trading at $30.43 at yesterday's close, so this would imply a further upside of around 10%.

No doubt Premier shareholders will be salivating at that thought. But we'll have to see what this ASX 200's management team decides to do.

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Premier Investments. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Consumer Staples & Discretionary Shares

Couple look at a bottle of wine while trying to decide what to buy.
Consumer Staples & Discretionary Shares

Treasury Wine Estates shares down 21% this year amid resurgent China demand

Are Treasury Wine Estates shares a bargain?

Read more »

I young woman takes a bite out of a burrito n the street outside a Mexican fast-food establishment.
Consumer Staples & Discretionary Shares

Guzman Y Gomez shares are down 22% this year. Time to buy?

Should I buy the dip in Guzman Y Gomez shares?

Read more »

supermarket asx shares represented by shopping trolley in supermarket aisle
Dividend Investing

Should I buy Coles shares for their reliable passive income?

We take a look at Coles’ passive income credentials and the potential for share price gains.

Read more »

man looks at phone while disappointed
Consumer Staples & Discretionary Shares

Guess which ASX 300 stock is down 9% on guidance downgrade

Investors are rushing to the exits today. But why? Let's find out.

Read more »

Supermarket trolley with groceries going up the stairs with a rising red arrow.
Consumer Staples & Discretionary Shares

Woolworths shares have soared 18% since March. Here's how much upside Macquarie still expects

Having raced higher since March’s multi-year lows, just how high can Woolworths shares go?

Read more »

A customer and shopper at the checkout of a supermarket.
Consumer Staples & Discretionary Shares

Broker watch: Are Woolworths shares a buy?

Do analysts think this supermarket giant would be a good pick for investors? Let's find out.

Read more »

Supermarket trolley with groceries on top of a red pointing arrow.
Consumer Staples & Discretionary Shares

Up 31% in a year, just how much more upside does Macquarie tip for Coles shares?

Can Coles shares smash the ASX 200 returns again in the year ahead?

Read more »

A customer and shopper at the checkout of a supermarket.
Consumer Staples & Discretionary Shares

Woolworths shares storm higher on strong Q3 update

The supermarket giant outperformed expectations during the quarter.

Read more »