Premier Investments’ Peter Alexander gets $2.6b equity valuation by Morgan Stanley as analysts eye potential

Premier Investments’ crown jewel, sleepwear retailer Peter Alexander, is “one of the highest-quality, most under-appreciated retailers in Australia”, say analysts. As the Solomon Lew-led Premier eyes a potential spin-off of its most successful fashion brand, analysts are eyeing its potential, and that of children’s stationery store Smiggle. Morgan Stanley analysts on Wednesday said they put Peter Alexander with an equity value of $2.6 billion, or about $16.25 per share, which would rank it in the top 15 consumer discretionary stocks on the ASX. Peter Alexander has been the nation’s fastest-growing retailer over the past five years, with 27 per cent pre-tax earnings growth, the analysts noted — a level nearly three-times faster than peers. But they believe Premier not separately disclosing Peter Alexander’s earnings or margins has potentially led the market to underestimate its future growth. The sleepwear retailer has targeted expanding its stores in its existing network, which has led to higher sales and analysts suggest the potential for up to 200 stores in Australia and New Zealand, a similar number to other specialty retailers like jewellery chain Lovisa and shoe store Platypus. Peter Alexander is also planning a launch into the UK, which it believes is under-served, and a nightwear market Morgan Stanley calculates is worth $US1.2b ($1.8b), about 2.6 times bigger than Australia — and without a “category killer” or specialist. The analysts are optimistic on Peter Alexander’s continued success at home too, given it it the only retailer of its kind of scale, with peers like Kmart, Target and Cotton On selling pyjamas and sleepwear as part of a broader offer. Peter Alexander was deemed to have a wider range and at more premium prices.