Finding big WA winners on the stock market has been hard work during the past 12 months, and even the past five years.
For a full set of TSR data on all WA companies, go to http://www.wabusinessnews.com.au/total-shareholder-returns.
Finding big WA winners on the stock market has been hard work during the past 12 months, and even the past five years.
IN the year to June 2012 only 19 per cent of ASX-listed companies based in Western Australia delivered a positive return to their shareholders.
During the past five years the picture was even worse, with just 16 per cent of ASX-listed companies based in Perth achieving a positive return over that period.
These figures, using research data supplied by Morningstar, illustrate the dismal performance of the stock market in recent years.
Morningstar tracked the share prices, dividend payments and other corporate events of more than 700 WA companies to calculate total shareholder returns over one, three and five years.
The Morningstar data, supplied to WA Business News, showed that investors who stuck to the relative safety of larger companies did better.
Investors who put their money into the state’s 50 largest companies were more likely to get a positive return, but they still had to pick their stocks carefully.
During the past 12 months, only 40 per cent of the state’s top 50 stocks achieved a positive shareholder return.
The picture was better for the past five years, but still mixed; about 63 per cent of top 50 stocks achieved a positive return over this period.
Large-cap stocks fade
The poor performers included the state’s largest companies.
Retail and industrial conglomerate Wesfarmers is WA’s largest company, with a market capitalisation at the end of June of $34.6 billion.
It had a negative TSR of 1.2 per cent over one year and minus 1.9 per cent per annum over five years.
Oil and gas producer Woodside, which has a market capitalisation of $25.5 billion, performed substantially worse.
It had a negative TSR of 22.2 per cent over one year and minus 4.9 per cent per annum over five years.
Nearly all of the mature mining and petroleum companies recorded a negative TSR for the past year, as investors took fright at the slowdown in China’s growth, the protracted financial crisis in Europe, and the easing in commodity prices.
The malaise was spread across commodities. Iron ore exporters Fortescue Metals Group, Atlas Iron, and Mount Gibson Iron, mineral sands miner Iluka Resources, uranium miner Paladin Energy, and nickel producers Independence Group and Western Areas all recorded a negative TSR over the past year.
These WA companies are not alone. Global resources companies BHP Billiton and Rio Tinto have also suffered large declines in their share price during the past year or so.
Some of the WA companies, such as Paladin, Mt Gibson, Independence, and Western Areas also reported a negative TSR over longer periods – three years and five years.
Others have delivered positive returns over the longer periods. Iluka, for instance, has a positive five-year TSR of 17.25 per cent per annum.
Buru Energy delivers
In a difficult market, however, there are always gems.
Market tiddler PLD Corporation achieved the most spectacular return in the year to June 2012 with a one-year TSR of 2,141 per cent.
Its performance says more about the quirky nature of this analysis when it is applied to tiny companies going through a restructuring.
PLD, formerly known as Portland Orthopaedics, has been going through a long-running recapitalisation process that led to a spike in its share price.
However its share price is still only 0.7 cents and its market cap just $2.2 million.
The real star last year was oil and gas explorer Buru Energy, which delivered a one-year TSR of 379 per cent.
Buru also recorded a very strong three-year TSR of 162 per cent per annum.
The driver of these strong returns was Buru’s sharply rising share price (it does not yet pay dividends), which in turn was driven by its exploration success in the onshore Canning Basin in northern WA.
Investor support for Buru was illustrated by its ability to raise $50 million in June in a share placement fully underwritten by investment bank JP Morgan and priced at only a small discount to its prevailing share price.
Buru also has the backing of Mitsubishi Corp, which is contributing $100 million to the exploration of conventional oil deposits and unconventional shale gas prospects in the Canning Basin.
Executive director Eric Streitberg said one of the challenges facing the company was balancing its exploration and development programs.
“We’re in the envious but somewhat awkward position of almost having too many prospects to drill,” Mr Streitberg told Company Insight last month.
“Clearly, working towards the monetisation of the conventional and unconventional plays we have already proven up will always have to take some precedence, although we will not be neglecting the other areas of high prospectivity.”
Buru was one of several oil and gas stocks to deliver strong returns to shareholders.
New Standard Energy, which is also drilling in the Canning Basin, had a one-year TSR of 184 per cent.
It has been helped by the backing of US oil giant Conoco Phillips.
A third oil and gas stock to deliver strong returns last year was Sun Resources.
Its share price has spiked sharply in just the past few months after it announced plans to acquire additional acreage in the Woodlark ‘tight oil’ play in Texas.
Sun took advantage of the strong share price this week, announcing a $20 million share placement at 5 cents per share managed by broking firm Hartleys.
Sun is following the lead set by Aurora Oil & Gas, which has achieved more success than any other local company pursuing unconventional oil and gas prospects in the US.
Aurora, which has grown to be WA’s 10th largest company with a market cap of $1.4 billion, suffered a big fall in its share price last year, but that followed spectacular gains over three and five years.
Aurora has achieved great success in the US’s booming shale industry. It is already producing oil and gas and is busily drilling more wells in its Sugarkane Field in Texas, located in the Eagle Ford shale trend.
The company has raised $US365 million this year through the issue of senior notes, which it will use to fund further development of its acreage.
Another company to deliver very strong returns last year was small-cap explorer Jameson Resources, which is pursuing an exploration program at its coal prospects in Canada.
Jameson will be hoping to emulate the success of another Perth company operating in that corner of the globe, Coalspur.
Coalspur has delivered very strong returns for longer-term investors, over three and five years, as it announced plans to develop its coal deposits in the Canadian province of Alberta.
But, as often occurs, the gloss has worn off its share price as it has moved from the exciting exploration phase to detailed engineering studies for its planned Vista coal mine.
Top 50 stars
Buru Energy led the best performers among the state’s top 50 stocks last year.
Other strong performers were gold miners Regis Resources and Silver Lake Resources, contractor Monadelphous Group, and telco iiNet (see Monadelphous moves up the rankings).
Another company with a high TSR was Africa-focused iron ore developer Sphere Minerals, though, like PLD Corporation, its results only serve to illustrate the sometimes-unpredictable nature of this kind of analysis.
Sphere is 87 per cent owned by international mining giant Xstrata, and consequently its shares barely trade.
However its shares briefly dipped in mid 2011 to $1.10, before quickly recovering to $3, where they have stayed ever since; hence the 12-month TSR of 183 per cent.
Long-term performers
Looking out over longer periods of time, the best performers among all WA companies were Papillon Resources, Sandfire Resources, and Northern Star Resources.
Papillon’s share price has risen from just a few cents in mid 2009 to about $1.10 currently, equating to a three-year TSR of 339 per cent per annum. The company is pursuing development of its flagship Fekola gold project in the West African nation of Mali.
Northern Star was not far behind, with a three-year TSR of 249 per cent per annum. Its success has been built upon its gold projects in WA.
The company is already in production at its Paulsens project, where it aims to lift output from 80,000 ounces to 100,000oz, and is working towards development of its neighboring Ashburton project, where it wants a stand-alone 100,000oz gold mine.
The star performer over five years has been Sandfire Resources, with a TSR of 82 per cent per annum over that period.
It has been a classic WA story – a small explorer that made a spectacular discovery and proceeded to develop a mine.
In its June quarter report, Sandfire said the DeGrussa copper project was 86 per cent complete. In the meantime, it has completed initial shipments of direct shipping ore and secured its first sales agreements for copper concentrate.
For a full set of TSR data on all WA companies, go to http://www.wabusinessnews.com.au/total-shareholder-returns.
