You don't have to wait for an extended pullback in the S&P/ASX 200 Index (Index:^AXJO) to find value.
Having said that, I won't be surprised to see the ASX sold off further after its stellar 8.8% rally in April, which was its best monthly advance since 1988.
But this doesn't mean its hard to find ASX shares trading in value territory right now. In fact, top brokers have just upgraded these stocks to "buy".
Double upgrade
The stock that got the most significant upgrade is logistics group Qube Holdings Ltd (ASX: QUB). Citigroup lifted its recommendation on the stock to "buy" from "sell" although it labelled Qube a "high risk" proposition.
The upgrade comes as Qube went into a trading halt to raise capital. This supports my view that the spate of new share offers is creating buying opportunities for investors.
"We think the de-risked balance sheet (gearing at ~28%), path for value realization around Moorebank and sale of non-core property assets (Minto), scope for strategic accretive acquisitions and cost controls will generate value for shareholders," said Citi.
The broker's price target on Qube is $2.75 a share.
In the overtaking lane
Meanwhile, automotive dealer AP Eagers Ltd (ASX: APE) finds itself on the "buy" list of Morgans even as the group announced layoffs and an aggressive cost cutting program.
It's no secret that sales of new vehicles have collapsed, but the broker believes it will survive and benefit from a consolidating industry.
"The new news from APE today was that it has cA$392m of liquidity now available to it (A$270m of cash and undrawn debt facilities + an additional A$122m of working capital facilities provided by OEMs)," said Morgans.
"This, in addition to the operational/cash preservation measures the group has employed, should see it well placed to trade through the peak of COVID-19 and its wake."
Morgans upped its recommendation to "add" from "hold" with a price target of $7.30 a share.
Resilient properties
Another COVID-19 hit stock that is expected to pull through and thrive is diversified property company GPT Group (ASX: GPT), noted Credit Suisse.
While GPT's portfolio of office, industrial and retail assets are exposed to small and medium sized businesses, which are likely to see a wave of closures, the broker believes GPT is safe from breaching covenants.
"For a breach to occur, we estimate cap rates would have to soften by >500bp or income would have to decline by >60%," said Credit Suisse.
"We note GPT has A$1.27bn of liquidity with only A$5mn of debt due to expire through to Dec-2021. We see a defensive equity raising as unlikely."
Credit Suisse also pointed out that the stock trades at a 27% discount to its net tangible asset with little or no value given to its funds business.
The broker upgraded its rating on the stock to "outperform" from "neutral" with a price target of $4.56 a share.
