Priced for 'worst-case scenario': Fundie names ASX share that can't get any cheaper

This stock has been punished for a reason in 2022, but now it's getting ridiculous.

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Regular readers will know that it is simply not possible to reliably pick the bottom of the market.

In fact, even if you tried, you won't even know whether you're right or wrong until that point has well and truly passed. 

That's the nature of bottoms — you can only define them in retrospect.

However, many experts reckon you can have better luck picking the bottom for individual ASX shares.

That's because investors can carefully study the business' performance, outlook and the market forces that could dictate its future.

Here's one such stock that Wilson Asset Management is bullish on: 

Quality ASX share at rock bottom now

With interest rates now a whopping 275 basis points higher than six months ago, 2022 has been a poor year for real estate and real estate ASX shares.

Dexus Property Group (ASX: DXS), for example, has seen its share price drop in excess of 32% since early May when the Reserve Bank kicked off the rate resurgence.

But Wilson equity analyst Anna Milne, in a recent memo to clients, reckoned the real estate investment trust (REIT) has now been oversold.

"The valuation implied at the current share price is close to a worst-case scenario," she said.

"Trading at a 30% discount to its asset backing, Dexus is at its lowest levels since the global financial crisis."

Why this time it's different

Milne explained, though, that the current situation is very different to the GFC trough.

"In 2009 the market was impacted by high debt margins, capital constraints and forced sellers. Today, demand for high-quality assets remains strong."

Dexus has traditionally owned office properties, but these days its holdings are more diverse.

"Dexus continues to move up the quality spectrum by recycling its lower quality office assets into high-quality development projects," said Milne.

"Additionally, growth in Dexus' industrial and funds management businesses is impressive and diversifies the business from its pure office exposure."

In any case, the office business also seems to be close to turning a corner.

"While the outlook for the office industry has been challenged in the last few years with the rise of working from home and now expectations for a recession, recent feedback suggests office market rents, occupancy and incentives have stabilised."

The company has "a strong balance sheet", added Milne, with borrowings comfortably lower than its target range.

"The current valuation has presented a good opportunity for us to increase our position in Dexus, and it is now a core holding of the fund."

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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