There are some great S&P/ASX 200 Index (ASX: XJO) blue chip shares out there available to Australians. A few could be worth looking at right now.
These two could be top ideas for considering:
Wesfarmers Ltd (ASX: WES)
Wesfarmers is one of the ASX 200 shares that is experiencing a higher level of growth through this strange period of time due to the impacts of COVID-19.
It has many recognisable retail businesses in its stable, including Kmart, Target, Catch, Bunnings and Officeworks. Wesfarmers also has some industrial businesses. There’s a group of businesses within the chemicals, energy and fertilisers (WesCEF) division including CSBP, Australian Vinyls, Australian Gold Reagents, Queensland Nitrates. Other industrial businesses include Blackwoods, Greencap and Workwear.
Bunnings is by far the key business, generating over half of the company’s operating earnings before tax (EBT).
In the FY21 half-year result, Bunnings generated 24.4% growth of revenue to $9 billion and earnings excluding the net contribution from property went up 39%. However, there was also strong growth from Kmart Group and Officeworks.
Looking ahead, Wesfarmers said that economic conditions in Australia have recovered strongly and the outlook is more positive, subject to future COVID-19 risks.
The ASX 200 blue chip share said that the portfolio of cash-generative businesses have leading market positions and remain well-placed to deliver satisfactory shareholder returns over the long-term.
However, the company noted that retail sales growth is expected to moderate from March as the businesses begin to cycle the initial impacts of COVID-19 in the prior year, particularly in Bunnings and Officeworks.
Wesfarmers also hinted that it’s looking to find acquisition opportunities when it said:
The group will continue to develop and enhance its portfolio, building on its unique capabilities and platforms to take advantage of growth opportunities within existing businesses and to pursue and transactions that create value for shareholders over the long term.
According to Commsec, the Wesfarmers share price is trading at 24x FY21’s estimated earnings.
APA Group (ASX: APA)
APA Group’s share price has dropped 14% since 5 November 2020. The ASX 200 energy infrastructure business has seen activity moderate in FY21 due to COVID-19 effects.
The business said that NT, WA and some sections of the east coast have seen good volume growth, but in Victoria there has been weaker contract renewals as well as lower energy consumption.
Looking at the financial numbers, APA’s half-year earnings before interest, tax, depreciation and amortisation (EBITDA) dipped 2.3% and underlying net profit fell 7% to $163 million. The reported bottom line was a net loss of $11.7 million because of a non-cash impairment recognised against the Orbost Gas Processing Plant of $174.5 million.
Despite all that, APA said that its delivered essential services delivery reliability and there was a successful major overhaul of the Diamantina Power Station.
The ASX 200 blue chip share continues to invest, it’s now expecting organic growth capital expenditure to be more than $1 billion over FY21 to FY23. APA believes it will play a central role in supporting the federal government’s plans for a gas-led economic recovery.
Based on the FY21 distribution guidance of 51 cents per security, it has a forward distribution yield of 5.4%.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of APA Group and Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.