The State of the Deal and the Deloitte Queensland Index

December 2021

Welcome to The State of the Deal including the 190th edition of the Deloitte Queensland Index, a review of Queensland listed companies on the Australian Securities Exchange (ASX).

Queensland’s great success in shutting out COVID has continued to deliver big economic benefits in Q3 2021, with the market capitalisation of ASX listed companies on the Deloitte Queensland Index surging to $135.2b at Sep-21, the highest month-end market capitalisation on record for the State, and representing an increase of 15.3% from Jun-21.

During Q3 2021, the Queensland economy has continued its strong recovery since the onset of COVID-19, with unemployment falling to its lowest rate in more than a decade, record housing construction (up almost 30%) buoyed by low interest rates and government incentives, consumer and business confidence returning to pre-pandemic levels, and a strong infrastructure investment pipeline (with an eye to 2032 Olympics) supporting the medium term outlook.

However, whilst the Sunshine State remains one of the most successful in Australia in managing the ongoing threat of COVID-19, there are no winners in a pandemic – and some of the COVID-induced barriers due to state border closures, as well as the emerging threat of new variants, continue to pose real risks for the state recording sustained economic growth.

Key takeaways for the September 2021 quarter:

  • The Deloitte Queensland Index has significantly outperformed the ASX All Ordinaries in Q3 2021: The Deloitte Queensland Index has increased by 15.3% since 30 June 2021, significantly outperforming the ASX All Ordinaries which rose by 0.6% during the same period, driven in part by:
    • the continued rebound in the share price performance of Queensland’s listed Energy & Resources, Financial and Consumer-focused companies, which were hit harder during the initial onsite of COVID-19;
    • strong jobs growth with an extra 58,000 jobs added since the beginning of the pandemic;
    • increasing consumer confidence fuelled by the roll-out of COVID-19 vaccinations and the announcement of national and state re-opening plans.
  • We continued to witness a shift in the composition of the Deloitte Queensland Index towards Energy & Resources companies during Q3 2021: Q3 2021 and the roll-out of vaccines has seen a continued shift in investor sentiment towards more cyclical equities (particularly in the energy & resources sector), and away from stocks that were the biggest beneficiaries of COVID-19 (i.e. technology businesses), reflecting:
    • surging commodity prices driven by increased global demand for coal and LNG; and
    • positive investor sentiment towards lithium and other renewable energy solutions driven by the global transition to carbon neutrality.
  • There are currently 178 companies in the Deloitte Queensland Index, with a total market capitalisation of $135.2b: During Q3 2021 the market capitalisation of 111 QLD listed companies increased, 56 companies lost ground, while the remainder were steady. As noted above, the top QLD performers by $ movement in market capitalisation in Q3 2021 were underpinned by the following sectors:
    • Energy & Resources – led by Orocobre Limited (ASX: AKE) and Novonix Ltd (ASX: NVX), which recorded market capitalisation increases of $3.3b and $2.3b respectively – with the former largely driven by Orocobre’s merger with Galaxy Resources in Aug-21;
    • Consumer – led by Domino’s Pizza Enterprises Ltd (ASX: DMP) and Flight Centre Travel Group Limited (ASX: FLT), up $3.5b and $1.3b respectively; and
    • Financials – led by Suncorp Group Limited (ASX: SUN), rising $1.7b in Q3 2021.
  • M&A deal volumes remained strong in Q3 2021: QLD M&A deal volumes continue to exceed pre-pandemic levels, with 81 transactions announced in Q3 2021 to the value of $3.3b – highlighted by Anchorage Capital Partners sale of Affinity Education to Quadrant Private Equity for c.$650m. The private equity market remains a significant source of deal activity, with unprecedent levels of dry powder (with estimates earlier this year of c.$14b ready to deploy), forecasted low global interest rates in the medium term, and optimism of a post-pandemic world, leading us to see extremely competitive bidding processes with very high multiples being offered. This also follows a bumper quarter in Q2 2021 (97 transactions announced with a total value of $4.5b), which marked the highest quarterly announced transactions in Queensland since 2016.


Published : November 2021

The State of the Deal and the Deloitte Queensland Index - December 2021
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