Premier Investments Ltd (ASX: PMV) shares have been having a rough week.
Since this last week, the ASX 200 share has lost 18% of its value.
While this is disappointing for shareholders, it could be a buying opportunity for the rest of us according to analysts at Bell Potter.
What is the broker saying about this ASX 200 share?
According to the note, the broker was disappointed with the company's trading update and has reduced its valuation to reflect this.
Commenting on the update, the broker said:
Premier Investments (PMV) provided 1H25 guidance with revenue -2.2% at the midpoint of $860m and EBIT (Pre-AASB 16 excluding interest income) of $160-165m, implying a decline of ~20% in EBIT (on pcp). With PMV noting ANZ sales to broadly remain flat on the pcp, we estimate a sales decline of 10-12% for international, which we largely attribute to Smiggle given the brand's ~60% exposure to offshore markets. We also view the best performing Peter Alexander (PA) brand to have maintained momentum and continue to expect sales growth of mid-high single digit in 1H25e.
In response to the release, Bell Potter has trimmed its earnings estimates for the next few years. It adds:
We adjust our revenue estimates factoring in the 1H25 guidance and incorporate higher costs into the core Smiggle brand and non-core Apparel Brands (AB). We also re-weight our estimates with a better recovery in 2H which sees smaller revisions for the 2H. The net result sees our NPAT forecasts -10%/-9%/-8% for FY25/26/27e.
Time to buy
Despite the above, the broker believes that this is an ASX 200 share to buy and sees major upside potential for investors.
Bell Potter has retained its buy rating and trimmed its price target to $34.00 (from $38.00).
Based on its current share price of $27.40, this suggests that its shares could rise 24% over the next 12 months.
In addition, it is forecasting a fully franked dividend yield of 3.7% in FY 2025, rising to 4.1% in FY 2026. The former brings the total potential 12-month return to almost 28%.
Commenting on its buy recommendation, the broker said:
Our PT is based on a SOTP with an unchanged 17x multiple for PA, downgraded 13x for Smiggle (prev. 14x), 7x multiple for AB (prev. ~8x) and a current market valuation for MYR/BRG. With Smiggle and AB earnings tracking weaker than BPe, we have decreased the relevant multiples (FY25e based). The net result is a ~11% decrease in our PT to $34.00 (prev $38.00) which is a >15% premium to the share price and we retain our recommendation at BUY. W
