COAST COMPANIES RIDE OUT TOUGH BREAK
Written on the 20 April 2012
THE Coast's top companies have avoided being wiped out and have shown grace in the face of pressure in the first part of fiscal 2012, says Deloitte Queensland corporate finance leader Robin Polson (pictured).
Gold Coast businesses rode out turbulent times and showed living (and working) in paradise was still a dream lifestyle worth aspiring to during the 12 months to January 31, 2012.
The Deloitte Queensland Index increased 16.1 per cent in the period compared to a decrease of 10.8 per cent in the benchmark ASX All Ordinaries.
There are 211 companies on the January 2012 Deloitte Queensland Index, from which 118 increased market capitalisation, 55 decreased and the remainder were steady.
While copper miner CuDeco briefly topped the January Gold Coast publicly listed companies with a market capitalisation of $590 million, Billabong reclaimed the mantle as the city’s No.1 company with a $760 million market cap after its share price hiked, lifting market cap from $480.9 million.
The iconic Gold Coast brand has tapped into the high-end market, partially selling Nixon Watches and paying down debt. The surfwear maker also rejected US private equity group TPG Capital’s revised $3.30 per share takeover offer that was well below the target’s market capitalisation.
Third on the index is Retail Food Group, which acquired all 110 Pizza Capers outlets for $30 million. The owner of Donut King had a market cap of $270.6 million.
Echo Entertainment, which owns Jupiter’s Hotel and Casino, is a new addition to the ASX as a result of the 2011 demerger from Tabcorp.
However, where there are gains there must also be losses. Sustainable company aggregator Pacific Environment no longer has a Gold Coast presence after moving to Sydney, while those delisting due to financial woes include Asia Pacific, Allied Brands and Intelligent Solar.
While other economic pillars including property, travel and retail continue to struggle, there is still plenty of resilience left in the Queensland economy.
There is a hive of private sector growth that cannot be tracked as they are not publicly listed, suggesting the strength of Gold Coast businesses remains somewhat concealed.
The Coast’s resources sector is experiencing promising growth without any hint of a major slowdown on the horizon. So far this year, the top three resources companies are Cudeco, Icon Energy and China Magnesium Corporation.
One would expect to see more, but after they reach a certain size they are usually acquired by multinational peers.
A November 2011 Deloitte study commissioned by the Queensland Resource Council predicted there would be 66 major projects across the state worth a combined $142 billion by the year 2020.
Businesses must fix their eyes on the mining boom or ensure they are at least close to it and think about where growth opportunities lie. They should develop strategies, finance and due diligence to achieve greater flow-on effects and benefits while minimising exposure.
The Gold Coast has taken the right step by vowing to become a fly-in and fly-out hub for the mining industry. Retailers can also find ways to target cashed-up mine workers.
However, companies must be careful about how they position themselves or they will fall even further behind.
Tourism operators need to stop lamenting about the strong dollar, ‘deal with it’ and encourage more positive change in the sector. They must make the most of opportunities that lie ahead.
Investors will return and when they do there will need to be more than one Billabong and other top performers in the property, travel and retail sectors.
Companies that respond well to our challenging market will reach higher ground.