3i Group PLC (LSE:III), the FTSE 100 investment company whose fortunes are closely tied to European discount retailer Action, has been put on an "upside catalyst watch" by Citi, which argues the recent share price slump has created an attractive entry point for investors.
The shares hit an all-time high of almost 4,500p in October and have fallen around 40% since. They have also underperformed the wider market by 40% over the past six months, dragged down by slowing like-for-like sales growth at Dutch discounter Action, which dominates 3i's portfolio.
Citi argues the slowdown is temporary, suggesting that rising inflation and consumer pressure are more likely to drive shoppers towards discount retailers than away from them.
The bank estimates the shares are trading around 15% below its net asset value estimate, with Action implicitly valued at just 20 times 2027 forecast earnings, a level that already prices in only modest sales growth of 3-4% over the medium term.
A closely watched investor day on 26 March could act as a near-term catalyst, with Citi expecting 3i to announce Action's expansion into the US in 2027, alongside entry into Bulgaria.
Citi trimmed its target price slightly to £42.80 but reiterated its 'buy' rating.
Shares in 3i were up 1.75% at 2,739p on Tuesday.