ASX blue-chip shares can offer investors both stability and good returns, if we buy at the right price.
There has been plenty of volatility in the last few weeks, pushing share prices lower and making them more appealing value.
The fund manager of listed investment company (LIC) BKI Investment Company Ltd (ASX: BKI), called Contact Asset Management, has revealed thoughts on two S&P/ASX 200 Index (ASX: XJO) shares in its portfolio that it is optimistic about and could deliver "significant long-term returns".
Let's look at the two potential ideas that BKI is optimistic about.
Woodside Energy Group Ltd (ASX: WDS)
Contact pointed out that Woodside has a global portfolio that includes oil and gas assets across Australia, the Gulf of Mexico, the Caribbean, Senegal, and Timor.
The fund manager believes Woodside has demonstrated its commitment to future growth by reinvesting through a substantial exploration program. Contact also noted Woodside has successfully delivered major projects such as the Sangomar oil development in Senegal, which achieved its first oil production in June 2024.
Contact also pointed out the ASX blue-chip share is progressing with other major growth initiatives, including the $12.5 billion Scarborough LNG project, which is now 80% complete and on track for completion in 2026. Another project, the $7.2 billion Trion development, is expected to start production in 2028.
The fund manager noted that strategic sell-downs of the Scarborough project are helping strengthen the balance sheet with $2.3 billion in cash proceeds. The Scarborough project has secured long-term LNG sales agreements for over 15mt.
Woodside has also expanded its LNG presence with the acquisition of the Louisiana LNG project in the US. The ASX energy share has entered into the lower-carbon ammonia market with an investment in Beaumont New Ammonia, which is aiming for 2025 ammonia production.
The fund manager described these projects as "generational", though they also require "substantial capital". The projects are expected to "deliver significant long-term returns", supporting Woodside shares' "attractive dividend yield". Contact has been comfortable building up a position in Woodside shares because of the amount of cash flow being generated from its projects.
According to the projection on Commsec, the ASX blue-chip share is predicted to pay a grossed-up dividend yield of 12% in FY25, including franking credits.
APA Group (ASX: APA)
APA is a major energy infrastructure business that transports a significant portion of Australia's gas around the country.
Contact was pleased by the recent FY25 half-year result, which saw "strong" financial results, according to the fund manager.
APA's revenue rose 7.1% to $1.36 billion, and operating profit (EBITDA) increased 9.1% to $1 billion. Free cash flow grew 3.6% to $552 million.
This performance was driven by newly acquired assets, increased customer demand for seasonal gas transmission capacity, inflation-linked tariff increases, effective cost management, and contributions from its long-term investment in the Pilbara Energy System, which plays a crucial role in powering the region's mining operations.
The business will deliver infrastructure projects to meet Pilbara's growing energy needs, integrating gas pipelines and renewable energy for reliable and sustainable power solutions.
In the first half of FY25, APA invested $339 million in capital investment, including the completion of the Port Hedland solar and battery project, the Kurri Kurri lateral pipeline project, and the initiation of the East Coast gas grid expansion projects.
The fund manager pointed out APA is progressing its growth projects, including the Sturt Plateau Pipeline and electricity transmission corridor development in WA.
APA is BKI's most 'active' position, with a 4.9% portfolio weight compared to an index weight of 0.4%.
