Every so often, there's a top ASX stock that looks such good value that it's too cheap to ignore. I believe that's the case with Brickworks Ltd (ASX: BKW) shares – I'd call it the best value opportunity in the S&P/ASX 200 Index (ASX: XJO).
While the Brickworks share price has recovered a the majority of its decline after telling the market of the weakness with its building product divisions, it is still down 4% from 10 March 2025, as the chart below shows.
For me, there are three key reasons why it makes a lot of sense to invest right now. Let's get into them.
Image source: Getty Images
Big asset discount
In my view, the easiest way to see how this top ASX stock is offering incredible value by simply looking at the value of its assets.
Brickworks recently revealed its FY25 half-year result, which showed Brickworks' 50% share of the industrial property trusts has a net value of $2 billion.
It also owns 25.65% of investment house Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), which currently has a market value of $3.27 billion.
Ignoring the rest of the business, those two assets combined are worth significantly more than the current Brickworks market capitalisation of approximately $3.75 billion.
Long-term value is building
The current values that I mentioned above are just a snapshot of how much they're worth today. This top ASX stock could benefit from the long-term growth of the underlying earnings of those assets.
Over the long-term, Soul Patts has regularly invested and expanded its portfolio in a growing number of businesses which are growing their value themselves.
The property trusts are also benefiting from long-term growth because of the rising rental income and the strong underlying demand. Warehouse demand is strong thanks to e-commerce growth and increasing inventory levels, according to Brickworks. It estimates the current passing rent for its Western Sydney estate within its joint venture trust is now approximately 26% below average market rent. This can be realised as contracts are renewed in the coming years.
Stronger rental income should help organically drive the value of the industrial real estate in the coming years.
Interest rates to come down further?
I think the high interest rate environment is a key reason why this top ASX stock has struggled in the last couple of years.
High interest rate costs are hurting demand for building products, so I think there's potential for a rebound with interest rates in the US and Australia now lower than they were a year ago. It's possible rates could come down further if annual inflation stays under 3%.
I think a reduction of interest rates could also be enormously beneficial for the property trusts. It would help reduce interest costs and also help increase the value of industrial properties, which would be very helpful for Brickworks shares, in my view.
Overall, I think this is a great time to buy this top ASX stock.
