The team at Goldman Sachs has an investment list that highlights a selection of fundamental buy-rated Asia-Pacific (APAC) stocks across its Global Investment Research department.
This list, which is named the APAC Conviction List – Directors' Cut, is designed to provide investors with a curated and active list of 20-30 stocks that the broker believes to be differentiated fundamental buy ideas across its APAC coverage.
Among the list this month are three ASX 200 shares. Here's why Goldman rates them among the best of the best in the APAC region right now:
Lynas Rare Earths Ltd (ASX: LYC)
The first ASX 200 share that Goldman is very bullish on its rare earths producer Lynas. The broker thinks investors should focus less on the short term and more on its bright long-term outlook. It said:
With the global neodymium (Nd) & praseodymium (Pr) market dominated by China (~70-80% of production), Lynas is an important ex-China source of NdPr. With the commissioning of LYC's Kalgoorlie facility underway and the recent 3-year extension to LYC's operating licence in Malaysia, [analyst] Paul Young believes investors should look through FY24 considering it is a transitional year.
Goldman has a conviction buy rating and $7.30 price target on its shares.
Qantas Airways Limited (ASX: QAN)
A second ASX 200 share that could be a high quality buy according to Goldman Sachs is airline operator Qantas.
The broker continues to believe that the market is undervaluing the Flying Kangaroo's structurally stronger earnings. It said:
We forecast a ~22% FY19-24e cumulative uplift in unit revenues (c. 4.0%pa), and ~50% drop-through of QAN's A$1bn+ structural cost-out program. QAN's current market capitalisation is in-line and enterprise value is still 3% below pre-COVID levels. As such, we believe QAN is not priced for a generic recovery, let alone prospects for improved earnings capacity. We continue to see upside associated with substantially improved MT earnings capacity.
Goldman has a conviction buy rating and $8.05 price target on its shares.
Xero Ltd (ASX: XRO)
A third ASX 200 share on the APAC conviction list is cloud accounting software company Xero.
It likes the company due to its strong long-term growth outlook, which is being underpinned by its huge total addressable market (TAM). It explains:
Xero is a Global Cloud Accounting SaaS player, with existing focuses in ANZ, UK, North American and SE Asian markets. We see Xero as very well-placed to take advantage of the digitisation of SMBs globally, driven by compelling efficiency benefits and regulatory tailwinds, with >100mn SMBs worldwide representing a >NZ$100bn TAM. Given the company's pivot to profitable growth and corresponding faster earnings ramp, we see an attractive entry point into a global growth story with Xero our preferred large-cap technology name in ANZ – the stock is Buy rated.
Goldman has a conviction buy rating and $180.00 price target on its shares.
