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

An Australian farmer wearing a beaten-up akubra hat and work shirt leans on a fence with livestock in the background and a blue sky above.
Cheap Shares

1 stellar Australian stock down 43% from all-time high to buy and hold forever

There are plenty of reasons to like this Australian stock.

Read more »

A woman is excited as she reads the latest rumour on her phone.
Cheap Shares

3 popular ASX stocks that look dirt cheap right now

Let's see which shares analysts think are being undervalued by the market.

Read more »

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

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

I think these stocks are too cheap to ignore.

Read more »

A man looks surprised as a woman whispers in his ear.
Cheap Shares

Recent dip buyers won big: 3 ASX shares that could repeat the feat

Analysts think these cheap shares could bounce back strongly.

Read more »

A man pulls a shocked expression with mouth wide open as he holds up his laptop.
Cheap Shares

2 ASX shares the market may be undervaluing right now

Bell Potter has good things to say about these cheap stocks.

Read more »

Happy work colleagues give each other a fist pump.
Cheap Shares

3 beaten-up ASX shares that could bounce back strongly

Analysts think these shares could bounce back with gains of ~40%+

Read more »

Couple looking at their phone surprised, symbolising a bargain buy.
Cheap Shares

Why I think this ASX small-cap stock is a bargain at $2.99

This small business looks like a big bargain to me.

Read more »

Cheap Shares

This leading fund manager is bullish on these 2 exciting ASX stocks

Here’s why these businesses could deliver strong returns.

Read more »