In the past few years there have been a number of successful spin-offs on the Australian share market.
The three that stand out to me are South32 Ltd (ASX: S32) spinning-off from BHP Billiton Limited (ASX: BHP), Orora Ltd (ASX: ORA) from Amcor Limited (ASX: AMC), and last week's DOMAIN DEF SET (ASX: DHG) spin-off from Fairfax Media Limited (ASX: FXJ).
The South32 and Orora spin-offs have gone on to create significant value for shareholders and I expect that Domain going off on its own will do likewise.
With that in mind, here are two spin-offs that I would like to see in the future:
Premier Investments Limited (ASX: PMV)
While I think Premier Investments is still a good investment as it is, I would love to be able to invest purely in its fast-growing and high-margin Smiggle business.
The company aims to open 100 to 120 new Smiggle stores in existing markets over the next two years, as well as expand into new markets. This is expected to result in Smiggle sales exceeding $400 million by FY 2020, up from $238.9 million in FY 2017. By comparison, excluding its Peter Alexander brand which is also growing strongly and should arguably join Smiggle in being spun-off, the rest of the business is far less attractive and expected to grow at a much slower pace.
Wesfarmers Ltd (ASX: WES)
With the supermarket space likely to become even more competitive with Amazon's arrival in Australia and ALDI's rapid expansion, I'd rather avoid an investment in Wesfarmers for the time being. Which is a shame because I really like its Bunnings business.
While a spin-off of the hardware business has been touted many times before and nothing eventuated, this time it could be different. One of its major shareholders is pushing for the spin-off and I wouldn't be surprised to see it happen in 2018. If it does, I'll be first in the queue.
