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."
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