This stock's biggest customer is Amazon

Want to profit from Amazon on the ASX? Try this stock.

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The ASX is an impressive stock exchange for a country of around 25 million people, but it only represents around 3% of the globe's market capitalisation. The rest of the world, particularly the US, has some of the world's most impressive businesses listed on other stock exchanges.

Amazon is changing the way many western country's citizens do things such as shopping habits. It also has a huge on-demand cloud computing platform. However, just because Amazon is listed on a foreign stock exchange doesn't mean that we can't profit from it.

Goodman Group (ASX: GMG) is one of Australia's largest real estate investment trusts (REIT). It's an industrial property group that owns, develops and manages real estate. Over the past five years its share price has grown from $5.22 to $8.92, representing a solid 71% growth.

This rise in value hasn't just been an interest rate boost, its operating earnings have grown significantly. Its operating earnings per share (EPS) increased from 30.5 cents in FY12 to 43.1 cents in FY17, which represents a CAGR of 7.2% per annum.

Goodman has been improving its balance sheet over the last five years too. In FY12 its gearing ratio was 23.9% and at the end of FY17 it had reduced to 5.9%.

The distribution to shareholders has also been growing during this period. In 2012 the distribution was 19.4 cents per security and in 2017 it had grown to 25.9 cents per security.

Its biggest customer by net income on a look through basis is Amazon, which is why I'm writing about Goodman Group. Its two other big global customers are Deutsche Post (DHL) and Japan Post (Toll), which could also be a play on e-commerce. Amazon will always require a warehouse for it base of operations, unless it turns its airship warehouse idea into reality.

Foolish takeaway

Goodman is currently trading at 19x FY18's estimated earnings with a distribution yield of 3.02%. It's not a screaming buy but I'd prefer it to quite a few other shares on the ASX at this price. However, it could suffer from interest rate rises over the coming few years.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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