Premier Investments Limited (ASX: PMV) shares have been strong performers over the past 12 months.
During this time, the ASX 200 blue chip stock has risen by an impressive 47%.
This is approximately two and a half times the 18% return by the ASX 200 index over the same period.
But if you thought you were too late to the party, think again. That's because one leading broker believes the Peter Alexander and Smiggle owner's shares can keep rising.
Broker tips ASX 200 blue chip stock to rise
Bell Potter was pleased with the company's decision to sell its Apparel Brands business to department store operator Myer Holdings Ltd (ASX: MYR).
The broker believes it is a good outcome for existing shareholders. Commenting on the deal, it said:
PMV announced the divestment of Apparel Brands (AB) to Myer (MYR) in an all-script deal, with a ~100% share-dilution in MYR implying a ~8x EV/Pre-AASB 16 EBIT multiple or a ~$601m valuation on AB. While the combination will benefit from various cross-strengths such as AB's sourcing and MYR's Myer One loyalty program with the current overlap at 40%, ~$30m in earnings synergies have been identified which we view as conservative as discussed in previous research, Synergising non-core brands and Entry opportunity.
PMV shareholders are to receive 7.2 MYR shares for each share held in the form of an in-specie capital distribution and dividend fully/partially franked (details to follow in December via Information Memorandum), which we think is accretive by up to ~$5/share, a good outcome for existing shareholders.
In light of this, its analysts have boosted their valuation of the blue chip stock.
Buy rating reaffirmed
According to the release, the broker has responded to the news by reaffirming its buy rating and lifting its price target to $38.00 (from $34.00).
Based on where the ASX 200 blue chip stock is currently trading, this implies potential upside of 13% for investors over the next 12 months.
In addition, the broker is expecting a 3.4% dividend yield in FY 2025. This boosts the total potential return beyond 16%. It concludes:
Our PT is based on a SOTP with an upgraded 17x multiple for PA, 14x for Smiggle, 8x multiple for AB (prev. ~5x) and a current market valuation for MYR/BRG. With the AB's implied multiple from the MYR acquisition coming in higher than BPe, we upgrade all multiples within the SOTP (FY25e). Our PT +13% to $38.00 (prev $34.00) and we continue to see upside to our PT from the potential re-rate in post-demerger PMV.
