Top brokers are urging you to buy these 3 ASX stocks today

It's not too late to join the ASX 200 bull party with leading brokers recommending you buy these ASX shares today.

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

It's hard to keep the bulls at bay! The morning market sell-off reversed at lunch with the S&P/ASX 200 Index (Index:^AXJO) trading 0.7% higher in the last hour of trade.

It's not too late to join the party either. Leading brokers have just named three ASX stocks that are trading at a significant discount to fair value.

While it's the iron ore majors like Rio Tinto Limited (ASX: RIO) and Fortescue Metals Group Limited (ASX: FMG) that have been dominating the spotlight in the sector, Goldman Sachs points to a lesser known buy idea.

New iron ore champ

The stock is Canadian miner Champion Iron Ltd (ASX: CIA). The broker initiated coverage on the stock with a "buy" recommendation and 12-month price target of $3.50 a share.

Champion's main asset is its 100% owned Bloom Lake iron ore mine in Northern Quebec. Management is aiming to double production to 15 million tonnes a year by the second quarter of 2023 and Goldman thinks is one of the lowest capital intensity iron ore expansions globally.

"Previous owner Cliffs had already spent US$1.2bn before Phase II was placed on hold," said the broker.

"Remaining capex requirements for CIA for the expansion from 8Mtpa to 15Mtpa is C$634mn (US$480mn) and equates to a capital intensity of just US$69/t."

That's well below the US$144 a tonne for Rio's IOCC expansion and US$118 a tonne paid by FMG for its Iron Bridge project.

Price target upgrade

Meanwhile, Morgan Stanley upgraded its price target on Charter Hall Group (ASX: CHC) by a massive 28.2% to $11.60 a share and reiterated its "overweight" call on the property group.

Not only is the group relatively unaffected by the COVID-19 pandemic, it's using the opportunity to acquire assets in the turmoil.

"One of the under-appreciated points about CHC is the expansion of its Funds Management margin – increasing from c.40% in FY15 to c.70% in FY19," said the broker.

This margin expansion is sustainable thanks to scale, a focus on lower-touch assets like triple-net properties and lower exposure to the troubled retail segment.

Trading at a discount to peers

Finally, Credit Suisse reiterated its "outperform" recommendation on the Healius Ltd (ASX: HLS) share price after it compared it to its closest rival Sonic Healthcare Limited (ASX: SHL).

The review comes in the wake of the sale of Healius' medical centres to a private equity consortium for $500 million. This will allow management to focus on turning around its underperforming pathology business.

"We estimate HLS pathology has on average, operated at ~300bp lower EBIT margin to SHL, yet this did widen in FY19 to ~400bp," said the broker.

"In our view, HLS is less profitable relative to SHL due to a larger collection centre footprint, higher rents and less complex test mix."

Credit Suisse thinks Healius can narrow this gap and pointed out that the stock's price-earning multiple is at a 10% discount to the ASX200 Industrials (excluding financials).

The broker's price target on the stock is $3.25 a share.

Motley Fool contributor Brendon Lau owns shares of Rio Tinto Ltd. The Motley Fool Australia has recommended Sonic Healthcare Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Cheap Shares

A photo of a young couple who are purchasing fruits and vegetables at a market shop.
Cheap Shares

Time to buy? One Australian stock that hasn't been this cheap in years

This ASX stock is cheaper than its P/E ratio suggests.

Read more »

Three happy office workers cheer as they read about good financial news on a laptop.
Cheap Shares

These ASX 200 shares keep smashing new highs. Too late to buy?

Finding cheap shares is hard, but not impossible, right now.

Read more »

Smiling couple looking at a phone at a bargain opportunity.
Cheap Shares

I think these 2 cheap ASX shares are buys for value investors

Here’s why these ASX picks could appeal due to how cheap they are.

Read more »

Two excited woman pointing out a bargain opportunity on a laptop.
Cheap Shares

ASX 200 raises the record AGAIN. Which stocks are 'cheaper' than the index?

The benchmark is running hot.

Read more »

Man dressed as santa giving a thumbs up.
Cheap Shares

Here are 2 cheap Australian shares for the Christmas list

Looking for value investment opportunities? Here's the expert take on two options.

Read more »

An older man wearing glasses and a pink shirt sits back on his lounge with his hands behind his head and blowing air out of his cheeks.
Cheap Shares

Down 40%: Is this cheap ASX 200 share a buy after its bombshell news?

Goldman Sachs thinks a total return of 30% is possible for investors from this stock.

Read more »

a man holds his arms out and shrugs his shoulders as if indicating he doesn't know the answer to a question he's been asked.
Cheap Shares

Down 40%! Should you buy this beaten down ASX 200 stock?

One leading broker has given its verdict on this sold-off stock.

Read more »

Two smiling work colleagues discuss an investment or business plan at their office.
Cheap Shares

Where to invest $10,000 in a bullish share market?

High share prices shouldn't dissuade you from investing in the markets.

Read more »