13/07/2015 - 06:38

Top performers in the TSR matrix

13/07/2015 - 06:38

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TSR is the most accurate measure of a business’s performance.

Total shareholder return has been a focus of Business News for 14 years when this paper first started reporting the financial year performance of Western Australian stocks under this measure.

We have run comprehensive tables showing WA-listed companies’ TSR for almost as long. During the past two years we moved to offer TSR as a database in our own search engine, BNiQ.

This is now updated monthly, keeping TSR more relevant to the movements in the market.

BNiQ offers TSR for more than 750 WA-based companies, as well as about 50 large national companies that we are constantly reporting on.

We believe this survey is the truest form of measurement of performance because it uses other forms of shareholder returns beyond actual share price gains and losses for the period.

Companies are recognised for paying dividends or making other forms of investor returns important to investors, especially those seeking income over capital gain.

In his articles, journalist Tim Treadgold has highlighted both the consistent outstanding performers and the returns from the big end of town, on which most in the investment community are focused.

This year the survey has highlighted Alexium as a company that stands out as a top-15 performer for each of the periods analysed.

That is surprising consistency for a company of its size and reflective of the fact that it is not a one-hit wonder. Many of the companies above it have made recent backdoor listings, with their long-term performance in a different field largely overwhelmed by the market reaction to recent change in business.

That said, shareholders in moribund stocks can’t complain when they are given a new lease of life. Arguably, Alexium’s story includes an element of that change, given it is the reborn shell of wine company Evans & Tate, however the stock’s performance over five years reflects investment decisions made back at start of that period.

Given share price movements are typically the biggest component of TSR, it does tend to favour stocks that move at the extremes. In the tables we provide both in the paper and online, you can do your own digging to find stocks that might be more than one-hit wonders.

In the paper we show the top 50 or so stocks over each of the periods Morningstar measures – one, three and five years. We also show the top group of WA companies by market capitalisation over those periods.

Subscribers can use the BNiQ search engine’s advanced filtering options to do their own selections on the basis on market capitalisation or returns for the given periods.
Backdoor listings

The TSR for 2015 shows the value of backdoor listings – when a shell company is used as a vehicle for listing new assets – with several recent such deals leading the league tables.

It is hard to understand why the authorities object to these arrangements, but backdoor listings have received harsh attention from regulators, and many backers have complained about rule changes.

While watchdogs need to maintain market credibility, the junior end of the market dominated by companies and service business based in West Perth has always been comfortable with risk; who would invest in minerals exploration if they were not?

Backdoor listings might challenge the norms, with a mining company suddenly becoming a biotech business, for instance, but most investors welcome these changes, especially when big gains are recorded.

This reflects the nimbleness of West Perth’s operators and those in neighbouring precincts. That shell companies have value and shareholders have a chance to share in a new business that actually interests the wider market is a bonus.

The alternative is letting companies fail outright, leaving shareholders unable to retrieve even a few cents in the dollar, and blocking the opportunity for significant upside. Why would the authorities think that a reasonable outcome?

Furthermore, backdoor listings save capital-starved technology companies from the expensive business of starting an IPO process from scratch. If everyone is aware of the risks, these scenarios are win-win, as our TSR data shows.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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