Some ASX shares are seeing much higher levels of growth because of the impacts of COVID-19.
With international travel still being restricted, lots of people are re-directing their household spending to other areas, which is boosting many ASX retail shares. There are also some healthcare businesses that are involved directly in the fight against the pandemic.
These two ASX shares could be ones to watch:
Sonic Healthcare Ltd (ASX: SHL)
The Sonic share price is only up 11.5% from where it was on 14 March 2020, yet the company is reporting much higher levels of revenue and profit because of COVID-19 testing. It's possible that COVID-19 testing could go on for years.
When releasing the half-year result for FY21, Sonic Healthcare said that it generated significant revenue and earnings thanks to the testing because it leveraged existing infrastructure. In the middle of February 2021, the company said it had performed more than 18 million COVID-19 PCR tests.
Half-year revenue was up 33% to $4.4 billion, earnings before interest, tax, depreciation and amortisation (EBITDA) increased 89% to $1.3 billion and net profit after tax (NPAT) increased 166% to $678 million.
Global base revenue for the ASX share, which excludes COVID-19 testing, was only down 1% – this has been significantly less impacted than in the first few months of the pandemic. The imaging division experienced revenue growth of 14%, much higher than the long-term industry average – Sonic called this an amazing outcome which included taking market share.
Sonic expects COVID-19 testing to continue into the foreseeable future with growing demand for COVID-19 immunity testing. It's also looking for acquisition opportunities.
The Sonic share price is valued at 24x FY22's estimated earnings.
Wesfarmers Ltd (ASX: WES)
Wesfarmers is one of the businesses that has seen significant growth of demand for some of its retail businesses.
People have invested in home projects and renovations, which has benefited the Bunnings business. In the half-year result, Bunnings experienced revenue growth of 24.4% to $9 billion and underlying earnings growth of 39%.
Wesfarmers managing director Rob Scott said:
The strength of the sales and earnings results reflects Bunnings' solid execution of the strategic agenda and the ability of the operating model to successfully adapt to changing customer behaviour and operating environments.
Bunnings continued to invest in the customer experience through its commitment to lowest prices, expansion of online product ranges and upgrades to in-store product displays across kitchen and garage organisation ranges. Travel restrictions and customers spending more time undertaking projects at home continued to support sales growth.
Another key area that the ASX share has benefited from was Officeworks which saw revenue growth of 23.7% and earnings rose 22% to $100 million. The company continues to see demand for technology and home office products as customers spend more time learning and working from home.
Kmart Group, which includes Kmart, Target and Catch, is seeing a resurgence of performance with an improvement of profitability at each business. Whilst revenue only increased by 9%, and underlying earnings went up 38.4%.
Wesfarmers is looking to diversify its earnings and it recently gave the go ahead for the lithium Mt Holland project.
According to Commsec, the Wesfarmers share price is valued at 25x FY21's estimated earnings.
