There could be big returns on offer from Endeavour Group Ltd (ASX: EDV) shares over the next 12 months.
That's the view of analysts at Goldman Sachs, which believe the ASX 200 blue-chip share is a top buy in September.
Image source: Getty Images
What is the broker saying about this ASX 200 blue chip share?
According to a note released this morning, Goldman Sachs has reiterated its conviction buy rating on the drinks company's shares with a price target of $6.60.
Based on the current Endeavour share price of $5.48, this implies a potential upside of 20% for investors over the next 12 months.
In addition, the broker is forecasting a fully franked 4% dividend yield from the blue-chip share in FY 2024.
This brings the total potential 12-month return to 24%, which is approximately two and a half times the market average return over the last 30 years.
Why is the broker bullish?
Goldman believes that Endeavour's shares are great value in comparison to other consumer staples leaders. It highlights:
Most attractive valuation amongst Staples peers: We continue to see defensiveness in the company's Retail business with relative market share of ~35% vs COL liquor of ~13%, 5.2mn active My Dan's members. EDV is currently trading at FY24e P/E of 18.4x with FY23-25e EPS CAGR of ~5%, which is the cheapest vs WOW, COL, WES.
The broker also believes that the market has got it wrong with the company's Hotels business and sees significant re-rating potential from this side of the business. It adds:
Hotels at significant discount: Whilst gaming impact from regulatory tightening in Victoria remains to be seen, our channel checks suggest that the key question would be impact from carded play and pre-commitment limits, for which implementation details are still to be determined. Assuming Retail value of 16x FY25e EV/EBIT, current market price implies ~A$2B Hotels EV or ~5.6x pre-AASB16 EV/EBIT, compared to recent AVC transactions of ~7.2x pre-AASB16 EV/EBITDA.
All in all, Goldman appears to believe that now could be an opportune time to add this ASX 200 blue chip share to your portfolio.
