Goldman Sachs has been looking at some new investment ideas and one that it is recommending to clients is the ASX 100 stock in this article.
The broker highlights that this company's shares have an "undemanding valuation" and could provide strong returns over the next 12 months.
Which ASX 100 stock?
The stock in question is Qube Holdings Ltd (ASX: QUB).
Goldman notes that Qube has evolved into one of Australia's premier logistics businesses, with a holistic suite of supply-chain services that are capable of growing market and wallet share over time.
According to a note out of the investment bank, its analysts have restarted coverage on the company with a buy rating and $4.65 price target.
Based on its current share price of $4.04, this implies potential upside of 15% for investors over the next 12 months.
In addition, the broker is forecasting dividends per share of 10 cents in FY 2025, 11 cents in FY 2026, and then 12 cents in FY 2027. This equates to growing dividend yields of 2.5%, 2.7%, and 3%, respectively.
In total, this means a 12-month potential return of approximately 17.5% for this ASX 100 stock.
Why is the broker bullish?
Goldman Sachs has named a number of reasons why it is feeling bullish about Qube. It explains:
What we like: a) While individual end product revenues can be volatile, heavy diversification enables the Operating division to grow reliably at GDP+. We also expect Patrick to have stable, long-term, mid-single-digit earnings growth. b) Margin volatility is lowering and earnings predictability is growing as the market better understands Qube and its drivers, and it diversifies and matures. c) Moorebank uncertainty is fading, with most capex deployed and IMEX operations beginning in earnest, while Qube is broadly exposed to agriculture and green metal tailwinds.
The broker also highlights that despite its positive outlook, the company's shares are looking undervalued and have the potential to re-rate to higher multiples in the near term. It said:
Qube's EV/EBITDA is trading close to historical lows vs both the ASX200 and global peers; we believe this represents an undemanding valuation despite business momentum and tailwinds.
Net-net, we expect long-term GDP+ earnings growth and improving ROACE towards the 12%+ target. Yet, Qube is trading near trough multiples relative to the market and peers, which in our view is supportive with re-rating potential.
All in all, this could be a quality blue chip to buy according to Goldman.
