Despite yesterday’s weaker-than-expected retail sales numbers, Credit Suisse has upgraded retail group Premier Investments.
The broker upgraded the stock to outperform from neutral and raised its price target by 27 per cent to $7.54 from $5.95 due to a reassessment of the potential for earnings stabilisation across its mature brands as well as offshore growth opportunities.
It believes the stock is still an attractively priced opportunity as its currently trading at 10 times fiscal 2013 earnings per share. Interestingly, there is a material divergence in views from fiscal 2014 onwards in terms of domestic brand stabilisation and offshore growth. This is where the opportunity lies.
The retailer has recruited a strong management team over the last 18 months, led by ex-David Jones CEO Mark McInnes, who is very highly regarded across the retail fraternity.
"Over the last 18 months Premier Investments has recruited a highly experienced management team with the capability to drive the company to a higher level of performance than has existed in the past. Premier has better-than-average supply chain and online capabilities. The company has a legacy of store network issues; leases are short term, providing scope for this legacy to be addressed in the near term”, Credit Suisse said in a research report.