THG PLC investor Kelso Group Holdings reiterated its call for the company to consider a demerger, believing its sum-of-the-parts is worth "significantly more" than the current market value.
Kelso said that the e-commerce, cosmetics and nutrition company is significantly undervalued by the market, and urged the Manchester-based firm to "do everything they can" to address this.
Kelso, which owns a 0.6% stake in THG, thinks this can be achieved by a separation.
John Goold, CEO of Kelso commented: “We believe that the market would respond well to a formal confirmation of a demerger of THG.”
It said that a demerger announcement is the most compelling route to resolving the inherent disparity between THG's share price and its fundamental fair value.
Kelso pointed out that many of the larger global peers for THG's Nutrition business trade on over 3-7x sales valuation multiples, while several of the larger global Beauty brands trade on 3-5x sales.
By comparison, THG trades on around 0.5x sales, it noted.
“Kelso believes that the UK stock market will not ascribe a sum of the parts valuation to THG, until the company publicly confirms its intention to demerge its businesses,” it said.
Such a demerger would allow each part of the business better access to capital to deliver further growth and build upon their market leading positions, it suggested, highlighting examples including Whitbread's demerger of Costa Coffee in April 2018 and GSK's Consumer Healthcare business in July 2021.