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.

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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.

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