If you are looking for some new additions to your investment portfolio, then Bega Cheese Ltd (ASX: BGA) shares could be worth a look.
That's a view of analysts at Bell Potter, which see potential for this ASX 200 share to deliver big returns over the next 12 months.
And if things go to plan, there could be even more upside to look forward to according to the broker.
What is the broker saying about this ASX 200 share?
According to a note, the broker believes that the diversified food company's shares are being undervalued by the market.
It highlights that its shares are currently trading at an estimated 11.4x FY 2025 EV/EBITDA and 10.4x FY 2026 EV/EBITDA. This is a discount to global listed dairy and FMCG peers and Bega Cheese's 10-year historical average of 12.3x EBITDA.
In light of this, it thinks investors should be snapping up its shares while they can.
The note reveals that Bell Potter has reaffirmed its buy rating and $7.00 price target on the ASX 200 share. Based on its current share price of $5.63, this implies potential upside of almost 25% for investors over the next 12 months.
To put that into context, a $10,000 investment would become approximately $12,500 by this time next year if Bell Potter is on the money with its recommendation.
But the returns may not stop there. The broker believes that if Bega Cheese demonstrates that it is on track to achieve its $250 million EBITDA target in FY 2028, its shares could be heading as high as $8.50. This is 50% higher than where they are currently trading.
Don't forget the dividends
And let's not forget the dividends. Bell Potter is forecasting a growing stream of fully franked dividends. This includes dividends per share of 12 cents in FY 2025, 13 cents in FY 2026, and then 15 cents in FY 2027. These equate to dividend yields of 2.1%, 2.3%, and 2.7%, respectively.
Commenting on its buy recommendation for the ASX 200 share, the broker said:
Our Buy rating is unchanged. BGA continues to execute against its strategy to deliver FY28e EBITDA of >$250m, which will also likely result in a deleveraging of the balance sheet in FY27-28e. If successful in delivering on these initiatives and sustaining its historical 10yr average trading multiple then the upside remains compelling, with an upside target of $8.00-8.50ps.
In addition, we viewed the recent NSW Supreme Court dismissal of proceedings brought by Fonterra around the Trademark agreement (on the use of the Bega brand for certain cheese products) as a positive development for BGA in the context of potentially bringing the brand back into its portfolio.
