Top company snapshot
Written on the 10 February 2009
TOP COMPANY SNAPSHOT
The Gold Coast is home to a diverse array of big name, publicly listed brands and top tier private players across various industries. Gold Coast Business News has identified the leading companies and how they’re placed to ride out this financial year. While predicting growth in the capital markets in 2009 is like trying to ‘catch a falling knife’ according to one Gold Coast corporate lawyer, the good news is that emerging industries in health and eco-tech are set to offset the doom lurking in the wake of diminishing commodities and finance industries
By Jason Oxenbridge
SECTORS involving heath, eco-tech, pets and strata property are the likely big winners of 2009, while commercial property, automotive and financiers will continue to be bruised by the global downturn.
According to corporate lawyer Glenn Vassallo, there are also a number of large scale public companies considering delisting from the ASX and privatising as they look to downscale operations.
“Predicting the markets in 2009 is like trying to catch a falling knife,” says Vassallo, a partner at Hynes Lawyers.
“We are three-quarters of the way through the storm and so far we have tolerated the storm. The last part will be the hardest. With increased unemployment come problems in the economy.”
Vassallo predicts recovery to take place around September when the banks are expected to start lending again. He cites an ‘interesting dynamic’ as market values drop below MTA values and private equity takeovers target the Gold Coast’s once fertile property and finance companies.
The corporate lawyer has acted on behalf of some of this city’s most influential company directors and is fielding a large number of enquiries from public companies seeking advice on how to de-list, while dual-listed companies are desperately searching for solutions to streamline overheads – sentiments that are driven by their respective shareholder bases.
“The economy is favouring private companies at the moment,” says Vassallo.
“My assessment of the market in 2009 is that we cannot ignore what is playing out at the moment. There are some difficult years ahead and those to be affected are the retailers in the automotive industry as well as housing and construction.
“There is a consumer phase that is concerned about debt and people saving money is hurting industries that rely on consumables. The retail sector has been hit hard.”
According to the director of the ASX Trevor Rowe, consumer confidence has slipped and created a ripple effect.
“It’s going to be a challenging and difficult year ahead,” says Rowe.
“The consumer is on strike. He is very cautious about spending money and is worried about his job and property. Consumers will continue to stick to essential items for the first half of the year.
“The credit markets are not generating properly and real estate is weak. We are fortunate that the residential lending market is okay and there is demand for affordable housing.”
Vassallo reiterates that demand for affordable health care will remain strong.
“Health is a strong industry because regardless of what happens in the financial markets, there is strong health care demand with a focus on diagnostics,” he says.
“There is also strength in strata businesses due to poor housing affordability and management rights also continue to be strong. There is also a good spread of businesses on the Coast operating in the pet food industry.
“The clean tech industry continues to gather momentum on the back of last year. Companies that had more liquidity than others were the hardest hit and hedge funds that were once active have also been hit hard.”
Property developers, who have tried their hand at funds management will not be tolerated in 2009-10, ala Octaviar (formerly MFS) and Centro.
“There is a clear indication that the market is not willing to entertain funds management plus property development,” says Vassallo.
“Developers are sticking to what they know. Being trusted with people’s money is a thing of the past and those that continue to do so will be punished by the market.”
Manufactures are also looking at ways to tighten their belts with those that have spent large sums on research and development on IP set to cop the brunt. The challenge, explains Vassallo, has been to streamline the manufacturing process. Traditional labour intensive manufacturers will find it very difficult over the next 12 months.
“February’s quarterly results will see a sell-off,” he says.
“What we have seen so far is Australian banks writing off large sums of money to the tune of around $850 million in relation to exposure to the US subprime crisis. There’s still a wave of write downs (to come).
“Whenever there’s a sniff of a downturn in the financial markets, the Gold Coast is the first to be hit. It’s like the tip of the whip; Brisbane is more towards the handle. We have seen companies like Sunland discounted in the market place.”
Vassallo notes that the ASX has tightened mechanisms that regulate short selling, exacerbated by the fall of share prices.
Rowe meanwhile, predicts some stability to return to the finance markets in the third quarter of 2009, with ‘some improvement’ forecast.
He says tourism, IT and the service industry will experience challenges and will look to cut back on capital expenditure.
Rowe, who is also the chancellor of the Gold Coast’s largest private tertiary institution at Bond University, says education is down across the state (around 3.5 per cent), but Bond University had recorded a ‘double digit increase’ in January.