Morningstar drops fair value estimate for Premier Investments
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The news: Morningstar has lowered its fair value estimate for Premier Investments after the company distributed all Myer shares it owned to its shareholders as part of its deal to offload its apparel brands business to the department store chain.
The numbers: Premier Investment shares had plummeted 22.54% to $22.13 by afternoon trade as a result of the in-specie distribution. Morningstar reduced its fair value estimate on Premier by $5 to $15.50.
Myer shares were down 3.65% to 92 cents, and Morningstar’s fair value estimate for the store is at 83 cents.
The context: The research house’s director Johannes Faul said the in-specie distribution lowered the enterprise value of Premier as shareholders now owned about two-thirds of Myer’s outstanding shares directly.
Faul said Premier shares were overvalued and while its sales momentum was expected to improve from fiscal 2026, the anticipated sales from the international expansion of Peter Alexander and Smiggle brands would be less profitable than in Australia and New Zealand and dilute profit margins.
What they said: “Sales and earnings are under pressure at Myer and Premier, with both companies citing a challenging retailing environment,” Faul said in a note.
“... The greatest and most obvious short-term risk to Premier's existing business is a prolonged economic downturn, with subdued discretionary retailing spending. However, this could also create acquisition opportunities. Premier is continuously focused on efficiency gains, including negotiating improved lease terms for its physical stores and driving e-commerce.”
On Myer, Morningstar said: “The merger with five apparel brands previously owned by Premier boosts sales growth from the second half of fiscal 2025. We forecast a revenue CAGR of 3% over the next decade”.
The source: Morningstar research
