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.

More reading

• Why Morgans is urging investors to buy ASX big bank stocks today
• Here are 3 ASX 200 shares with dividend yields over 8%
• Iron ore prices: Are the Rio Tinto, Fortescue and BHP share prices a buy?
• ASX 200 flat: Altium update disappoints, Metcash posts full year loss
• Is the Domino’s Pizza share price a good buy at $68?

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.

The post Top brokers are urging you to buy these 3 ASX stocks today appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/2YRUOTk

It’s quite rare that the Altium Limited (ASX: ALU) share price is among the worst performers on the S&P/ASX 200 Index (ASX: XJO).

It is even rarer for the electronic design software company’s shares to be the worst performer on the index.

But that is the case on Monday, with the Altium share price down over 8% to $33.31 in afternoon trade. At one stage its shares were down almost 13% today.

Why is the Altium share price sinking lower?

Investors have been selling the company’s shares after it released a disappointing trading update.

Despite the company launching attractive pricing and extended payment terms during the pandemic, it hasn’t been enough to offset the tough market conditions it is facing.

And although the company expects to deliver “solid” sales growth in FY 2020, it will fall short of the consensus estimate of US$192.5 million.

This is because traditionally Altium closes a significant amount of its second half business in the final two weeks of June. But with increased COVID-19 infection rates in the United States and a recent lockdown in Beijing, this won’t be the case this year.

Is this a buying opportunity?

While today’s share price decline is disappointing, I think it has created a buying opportunity for investors that are looking to make a long term investment.

I’m confident that Altium’s underperformance this year is strictly pandemic-related and expect it to bounce back once the crisis passes.

Overall, I believe that industry tailwinds remain very supportive of its long term growth and expect it to achieve its 100,000 subscribers target by FY 2025.

Combined with its other promising businesses, such as Octopart and NEXUS, I expect Altium to grow its earnings at an above-average rate for many years to come. This could make it a market-beater over the 2020s.

More reading

• Why Altium, Australian Ethical, Flight Centre, & Transurban are dropping lower
• ASX 200 flat: Altium update disappoints, Metcash posts full year loss
• These 5 ASX shares were last week’s top performers
• Altium share price sinks 7% lower after FY 2020 trading update
• Where I would invest $50,000 into ASX shares immediately

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Altium. The Motley Fool Australia has no position in any of the stocks mentioned. 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.

The post Is the Altium share price in the buy zone after today’s decline? appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3fOrzb4