Why this $7 billion ASX-listed company is a 'hidden gem': expert

This business supplies Chemist Warehouse, which is a giant that's still rapidly growing. And Australians still need pharmaceuticals regardless of inflation or wars.

| More on:
Contented looking man leans back in his chair at his desk and smiles.

Image Source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A little-known ASX stock that represents a supplier for the ubiquitous Chemist Warehouse chain is set to zoom ahead this year.

That's the opinion of Prime Value portfolio manager Shih Thin Wong, who said that in turbulent times such as now, businesses with resilient demand would win.

"I want to be comfortable owning companies which I think will give me earnings growth profile regardless of the macro environment," he told Switzer TV Investing

"And can control a number of elements that will drive growth internally… And I want to be owning companies that are less reliant on what's happening in the global financial markets."

We'll continue to buy regardless of economy

One ASX share that fits all those criteria is New Zealand's EBOS Group Ltd (ASX: EBO), according to Wong.

"It's not a company which is really followed by Australian fund managers that closely. But it's a hidden gem in the mid-cap space."

Wong notes that one of EBOS' clients is a huge retailer that all Australians will have shopped at one time or another. 

"It really is a key supplier to Chemist Warehouse, which we know is growing very strongly. So there's growth in that pipeline."

In times of rising interest rates and wars, pharmacy and medical supplies industries are known to be robust.

"We're comfortable that it's got 8% to 12% earnings growth in the next 2 to 3 years," said Wong.

"We will continue to buy pharmacy products whether the economy is good or bad."

There is also an acquisition that EBOS will settle in the coming 24 months, which will bring it earnings growth, according to Wong.

"The management of this company is really strong."

EBOS, which is dual-listed on the NZX and ASX, has a market capitalisation of $6.9 billion. 

Its ASX shares have lost about 7% for the year so far, closing Friday at $36.05.

According to CMC Markets, 6 out of 10 analysts currently rate the stock as a "buy". Five of them consider it as a "strong buy".

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Broker Notes

A bland looking man in a brown suit opens his jacket to reveal a red and gold superhero dollar symbol on his chest.
Broker Notes

Bell Potter names more of the best ASX 200 stocks to buy in May

These stocks could be best buys this month according to the broker.

Read more »

A financial expert or broker looks worried as he checks out a graph showing market volatility.
Broker Notes

Leading brokers name 3 ASX shares to buy today

Here's why brokers believe that now could be the time to snap up these shares.

Read more »

Man looking upwards contemplating which shares to buy
Broker Notes

CSL shares have climbed 10% since 11 April. Is it too late to buy?

What are analysts saying about this biotech giant after its recent rally? Let's find out.

Read more »

Excited couple celebrating success while looking at smartphone.
Broker Notes

Bell Potter names the best ASX 200 stocks to buy in May

The broker is feeling bullish on these names this month. Let's find out why.

Read more »

Red buy button on an apple keyboard with a finger on it representing asx tech shares to buy today
Broker Notes

Top brokers name 3 ASX shares to buy next week

Brokers gave buy ratings to these ASX shares last week. Why are they bullish?

Read more »

Three people in a corporate office pour over a tablet, ready to invest.
Broker Notes

Brokers name 3 ASX shares to buy today

Here's why brokers are feeling bullish about these three shares this week.

Read more »

A mature age woman with a groovy short haircut and glasses, sits at her computer, pen in hand thinking about information she is seeing on the screen.
Share Market News

ASX shares in April: 8 key takeaways according to Macquarie

Here are eight key takeaways from April, according to a new note from the broker.

Read more »

A shocked man holding some documents in the living room.
Broker Notes

Macquarie's take on Judo Capital shares after suddenly falling 19% yesterday?

Judo Bank was the ASX's top-performing banking stock in 2024.

Read more »