Buy this top ASX 200 stock for an 18% gain and 4% dividend yield

Bell Potter has resumed coverage on this stock and is feeling very positive.

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Whether you're looking for big gains or an attractive dividend yield, the ASX 200 stock in this article could be for you.

That's because it has been named as a buy, tipped to rise strongly from current levels and provide investors with a great dividend yield.

Which ASX 200 stock?

The stock in question is Just Jeans, Peter Alexander, and Smiggle owner Premier Investments Limited (ASX: PMV).

According to a note out of Bell Potter, it has reinstated coverage on the retail conglomerate following a change of analyst.

The good news is that the broker's new analyst has been running the rule over the ASX 200 stock and believes the market is undervaluing it. Particularly given the prospect of the demerger of the Peter Alexendar and Smiggle businesses. They said:

PMV is currently trading on ~14x FY26e P/E (BPe) which we think is conservative given the value that we see emerging from the potential demerger of PMV's two key brands, Smiggle and Peter Alexander which we believe are global roll-out worthy and highly profitable.

In addition to PMV's market share of ~6% in the apparel vertical and ~15% in the stationary space in Australia, the Smiggle brand is also a large player in the UK market. As the Smiggle brand looks to grow its presence in Middle East & Indonesia via a low-risk wholesale model and Peter Alexander into the UK, we think the two brands have a long runway ahead.

Big returns ahead

The note reveals that the broker has resumed coverage on the ASX 200 stock with a buy rating and a $35.00 price target.

Based on the current Premier Investments share price of $29.62, this implies a potential upside of 18% for investors over the next 12 months.

But the returns won't stop there. Bell Potter is expecting the company to pay fully franked dividends of 120.8 cents per share in FY 2024 and 125.4 cents per share in FY 2025. This equates to dividend yields of 4.1% and 4.2%, respectively, for investors.

Overall, that's a total potential 12-month return of greater than 22% according to the broker. It concludes:

We recommence coverage with a Buy rating and PT of $35.00 based on a sum-of-thepart valuation (13x target multiple for core brands and 7x for Apparel Brands). We view PMV's FY25e P/E of ~15x (BPe) as attractive compared to the global peer group median of 14x. We particularly focus on the value that we see emerging from the potential demerger of PMV's two key brands, Smiggle and Peter Alexander which are global roll-out worthy somewhat similar to some of the dominant players such as LOV and LULU, highly profitable in comparison to the peer group (EBIT margins wise) and as we see the current trading multiple of PMV as conservative.

Motley Fool contributor James Mickleboro has positions in Lovisa. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Lovisa and Lululemon Athletica. The Motley Fool Australia has recommended Lovisa and 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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