Australia Markets open in 4 hrs 38 mins

Top brokers say buy these 2 controversial ASX stocks today

Brendon Lau
Scared woman

Stocks are investors’ best friend these days with the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index looking like it will chalk up its sixth consecutive trading day of gains.

The top 200 stock benchmark climbed 0.1% to hit a new 11-year high of 6,556 points in after lunch trade although not all ASX stocks have found favour with the market lately.

But a handful of these ASX shares that have been pushed off the bull market wagon could represent a nice buying opportunity – at least that’s what some leading brokers are saying.

A stock worth punting on

The first castaway that may be worth rescuing is the Star Entertainment Group Ltd (ASX: SGR) share price, which got hammered yesterday when it issued a profit downgrade and launched a cost cutting exercise to save up to $50 million a year.

The casino operator warned that FY19 earnings before interest, tax, depreciation and amortisation (EBITDA) will fall to $550 million to $560 million compared with the $568 million it posted last year and the $600 million that brokers were expecting.

But UBS thinks the SGR share price is still worth punting on and has reiterate its “buy” recommendation on the stock even as it lowered its price target to $4.70 from $5.60 per share.

“Low main floor table hold and surprisingly low VIP turns (against a low win rate) are two issues that could be seen as beyond SGR’s control,” said UBS.

“While these concepts are difficult to model, they can explain a large part of the variance in the earnings miss.”

However, the broker acknowledged that its valuation is based on the assumption that there is no change to the competitive environment in the Gold Coast and a favourable tax outcome in Sydney.

The dog of DOW with some bite

Another stock that was put in the sin bin for its exposure to a problematic project is Downer EDI Limited (ASX: DOW).

The engineering and construction group announced two weeks ago that its partner Senvion in the Murra Wurra wind farm had gone into voluntary administration and potentially leaving Downer on the hook for the project.

But Macquarie Group Ltd (ASX: MQG) thinks this risk is overblown and has kept its “outperform” recommendation on the stock with a 12-month price target of $8.53 a share

“We recently estimated a ‘worst case’ impact range of -$57m-$92m after tax re potential Murra Wurra exposure,” said the broker.

“This compares to -$544m of market cap loss since May 29 which is 6-9.5x larger. We think there is a pathway to completion with project >50% complete and Senvion still operating on-site. DOW holds a substantial bank guarantee from Senvion ($64m) which also provides protection.”

But you don’t need to dig through other investors’ trash to find treasure. Buying out of favour stocks is typically a riskier endeavour and those who prefer to buy outperforming ASX stocks with more upside should read this free report from the experts at the Motley Fool.

Follow the free link below to find out more.

These ASX shares have shot up 204% and even 954%, but we think they’re just getting started

The $700 billion “war on cash” is on… and even The New York Times is calling it “a goldmine of staggering proportions”…

That’s why The Motley Fool has just released a brand-new research report: “Leave Your Wallet at Home: 2 Stocks for the Digital Payments Revolution.” Inside, you’ll find 2 expert-picked ASX shares poised to profit from this sweeping tech revolution.

Heck, stock #1 is already up 204% in just the last two years. While Stock #2 has climbed an eye-watering 954% since 2015 alone…

Yet we’re convinced the sheer biggest returns could be still ahead, with 10X or more potential profits still on the table. Simply click the link below now and we’ll show you how to snap up this timely (and potentially highly profitable) new research for FREE.

Click here to snap up your copy of “Leave Your Wallet at Home: 2 Stocks for the Digital Payments Revolution.”

More reading

Motley Fool contributor Brendon Lau owns shares of Macquarie Group Limited. Follow him on Twitter @brenlau.

The Motley Fool Australia has recommended Macquarie Group 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 Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019