Figures bear out a bad year for blue chips

27/08/2009 - 00:00


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NO matter which way you cut it, the 2008-09 financial year was a shocker for investors in local companies, with only 110 of the 730 or so Western Australian-listed companies managing a positive return of any sort.

Figures bear out a bad year for blue chips

NO matter which way you cut it, the 2008-09 financial year was a shocker for investors in local companies, with only 110 of the 730 or so Western Australian-listed companies managing a positive return of any sort.

But the story was diabolical for WA's largest companies, including traditional blue chip investments such as Wesfarmers, Woodside Petroleum, and West Australian Newspapers, and high-profile companies such as Fortescue Metals Group.

Of WA's 30 largest corporations, each of which had a market capitalisation of $500 million or more at the end of June, only eight managed a positive shareholder return for the financial year.

Aspiring uranium miner Extract Resources, which will remain a speculative play until it can develop its Rossing South mine in Namibia, topped the list with a TSR of 406 per cent.

The gap to next best is vast, with established oil producer Carnarvon Petroleum coming second with a TSR of 53.7 per cent. Carnarvon currently produces more than 4,000 barrels of oil a day from its onshore leases in Thailand, but is eyeing significant increases on the back of drilling success at its offshore permits in both Thailand and WA.

Gold developer Centamin Egypt was rewarded for a decade of persistence with a TSR of 47.9 per cent as its market worth grew to $1.78 billion. Centamin has beaten both the sceptics and history to develop Egypt's first gold mine in modern times at its 13 million ounce Sukari deposit. The mine poured first gold in June and will produce an average of 200,000 ounces annually for at least 15 years.

Another great global success story was fourth on the list, with a TSR of 37.3 per cent. Perth-based education specialist Navitas has carried all before it since listing more than four years ago and it is now the world's biggest independent provider of specialist education services.

Navitas works with universities and colleges worldwide to provide students with the specific skills needed to complete tertiary studies, particularly overseas students who may struggle with language and cultural differences associated with studying in a foreign country. It also provides English language education and vocational training courses.

Managing director Rod Jones said it was gratifying that Navitas was starting to gain recognition, not only within the education sector, but also from the investment community.

"Over the last 12 months, we've finally started to get a bit of recognition here ... and that is important in adding value to what we do and to the understanding of what we do, because we are so much out in left field," Mr Jones told WA Business News.

Critically, he attributed the firm's success in the face of challenging financial conditions to the fundamental importance of education, especially in times of difficulty. That was particularly so in developing nations, which provided the bulk of Navitas' students.

"Clearly what you see in good times and bad, is a real demand for education," Mr Jones said. "One of the last things parents will give away is the potential of educating their kids."

Navitas had also benefited from the downturn as more local students turned to education as a means of making themselves more attractive to employers in the more competitive jobs market, he said.

Consequently, the business had a strong countercyclical element that helped insulate it against the worst of the difficult economic climate.

Only two other established and profitable top-30 WA businesses managed positive TSRs for the year.

Henderson shipbuilder Austal was rewarded for its success in winning multi-billion dollar contracts to provide high-speed transport vessels for the US military by posting a TSR of 14.5 per cent for the year.

And Bunnings Warehouse Property Trust, which owns all of Bunnings warehouse sites and leases them to the powerhouse home improvement arm of Wesfarmers, just scraped into positive territory with a TSR of 2.7 per cent.

That compares to the dismal performance of Wesfarmers itself, which recorded a negative TSR of 31.4 per cent.

And though uranium has begun to attract fresh investor interest, sector leader Paladin Energy could do no better than a negative TSR of 23.1 per cent on the back of a slower ramp up at its Langer Heinrich mine in Namibia and development hiccups at its Kayelekera mine in Malawi.

Most of WA's top 30 stocks fared much worse.

Despite being on the verge of becoming one of the world's biggest independent producers of LNG, Woodside Petroleum managed a negative TSR of 34 per cent as investors shunned companies with big investment plans.

As a company leveraged to the volatile WA resources market, West Australian Newspapers suffered a negative TSR of 39.9 per cent, no doubt exacerbated by the boardroom and editorial turmoil afflicting it in late 2008.

Former market darling Fortescue Metals Group also came back to earth with a negative TSR of 68.2 per cent as the Andrew Forrest-led iron ore miner was hit by the sudden decline in Chinese iron ore demand in the December and March quarters. The same factors pushed fellow iron ore miner Mt Gibson Iron to the bottom rung of WA's top 30 stocks with a negative TSR of 76.9 per cent.


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