Premier's Near-Term Trading Out of Its Control, but Long-Term Growth Trajectory Remains Strong

No-moat-rated Premier Investments reported first-half underlying operating profit growth in line with our expectations. Nevertheless, we cut our full-year EPS estimates by 22% and 59% for fiscal 2020 and 2021, because we anticipate severe disruptions to the group’s retailing operations. We forecast the COVID-19 pandemic to weigh on consumer spending globally as well as sharply lower footfall to Premier’s stores. However, we forecast the coronavirus disruptions to be short-lived and expect a strong economic recovery from mid-fiscal 2021, leaving our longer-term earnings forecasts virtually unchanged. As a result, we reduce our fair value estimate by a mere 3% to AUD 15.50. Like us, management and the board aren’t too concerned by the current downturn and maintain their positive outlook for the company’s prospects. Premier’s board’s decision to declare a record interim dividend of AUD 0.34 says it all.