Both Brickworks and Webjet are seeing a recovery. They could be quality picks.
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S&P/ASX 200 Index (ASX: XJO) shares could be the place to find high-quality businesses.
Businesses further down the market capitalisation list might be opportunities that are able to deliver profit growth.
Here are two ASX 200 shares that could be long-term ideas:
Webjet Limited (ASX: WEB)
Webjet is one of the ASX travel shares that has suffered as a result of all of the COVID-19 impacts.
Both the domestic and international travel completely dropped off in 2020. That’s why the Webjet share price plunged to under $3 at the bottom of the crash.
But, now Webjet is reporting a recovery.
One of the brokers that likes Webjet is Macquarie Group Ltd (ASX: MQG), which has a price target of $6.35. That suggests a potential upside of more than 25% over the next 12 months.
The ASX 200 company recently released its FY21 result which showed revenue of $38.5 million and an underlying net loss after tax of $88.8 million. The statutory net loss was $156.6 million.
Webjet said that its online travel agency (OTA) profitability continues to improve. Management said that this underscored its brand strength as the number one OTA and scalability of the business model. Its market share continues to increase. The FY21 second half earnings before interest, tax, depreciation and amortisation (EBITDA) margin has gone back above 30%.
It also revealed that WebBeds is committed to emerging as the number one global business to business provider, taking advantage of new revenue opportunities and transformation initiatives on track to reduce costs by at least 20% when back at scale. WebBeds is now targeting an EBITDA margin of 62.5%.
Webjet said that as markets reopen, businesses are rebounding quickly. As at April 2021, Webjet OTA Australian domestic bookings were 95% compared to April 2019 levels. The WebBeds USA total transaction value (TTV) was at 83% of April 2019 levels and Online Republic bookings were 48% of April 2019 levels.
According to Macquarie, the Webjet share price is valued at 27x FY22’s estimated earnings.
Brickworks Limited (ASX: BKW)
Brickworks is another ASX 200 share that is seeing stronger demand for its building products and assets.
In a recent trading update, Brickworks highlighted that in Australia, the significant uptick in housing approvals is now translating to increased building activity. Its sales are particularly strong in Queensland and Western Australia over recent months. However, the availability of some materials, such as timber for house trusses, is an issue in some areas. The resultant delays are likely to flatten and extend the duration of the existing pipeline of work, according to Brickworks.
It’s expecting FY21 local currency earnings before interest and tax (EBIT) to be stronger in both the Australian and US divisions.
Operations in the US have been harder hit by the pandemic, particularly in the first half. However, with the vaccine program in the US well advanced, building activity in the US is now ramping up.
The ASX 200 business also reported a revaluation profit with its joint venture industrial property, with Brickworks’ share expected to be around $100 million. Brickworks expects this will contribute to record property underlying EBIT of around $240 million to $260 million for FY21, up from $129 million in FY20.
Brickworks managing director Mr Lindsay Partridge said:
We have seen strong demand and sustained growth in the value of our property trust over a number of years. The COVID-19 pandemic has only fuelled this growth, by accelerating industry trends towards online shopping and increasing the importance of well-located distribution hubs and sophisticated supply chain solutions.
Practical completion of the Amazon facility at Oakdale West is expected to occur in the first half of FY22. The even larger Coles Group Ltd (ASX: COL) distribution warehouse is now under construction, with completion of this facility scheduled in early FY23.
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Motley Fool contributor Tristan Harrison 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 owns shares of and has recommended Brickworks, COLESGROUP DEF SET, Macquarie Group Limited, and Webjet Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.