The State of the Deal and the Deloitte Queensland Index

Analysis

The State of the Deal and the Deloitte Queensland Index

February 2021

Welcome to The State of the Deal including the 188th edition of the Deloitte Queensland Index, a review of Queensland listed companies on the Australian Securities Exchange (ASX).

A bumper quarter for Queensland M&A to end 2020 - the year of adversity but also unprecedented resilience, collaboration and transformation. Queensland listed companies and M&A activity continued to rebound strongly since the onset of the COVID pandemic with Q4 2020 marking the highest quarterly announced M&A transaction volume since 2016 and the Deloitte Queensland Index returning to pre-COVID levels.

Looking ahead, the state’s Achilles heel remains its persistently high unemployment and underemployment rates. Without addressing the structural issues in the economy that are keeping these elevated, a sustained recovery will be more difficult for Queensland.

That said, Queenslanders deserve to have a spring in their step. The health response to the pandemic has been strong, and that’s meant businesses have been able to reopen earlier and to a greater extent. That puts the state’s economic recovery several steps in front of some other parts of the country – and even more, of the rest of the world.

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

Key takeaways for the December 2020 quarter:

  • Positive returns in the Deloitte Queensland Index and ASX All Ordinaries in 2020: The Deloitte Queensland increased by 10.6% in Q4 2020 resulting in a positive overall return for 2020 (0.3%) despite a drop of 31.5% in Q1 2020 due to COVID, consistent with broader national trends with the S&P/ASX All Ordinaries returning 0.7% for 2020 (14.0% in Q4 2020) despite a drop of 24.9% in Q1 2020. This reflects: 
    • a recovery in investor confidence particularly in the Consumer and Financial sectors as a result of easing of COVID related restrictions, re-opening of state borders, vaccine prospects and announced stimulus packages
    • continued record low interest rates shifting investors away from the fixed interest market
    • substantial increases in the TMT sector in 2020 as demand for data storage, processing, cloud computing and related services continue to increase particularly due to the substantial growth in virtual services and online sales as businesses seek to rapidly shift their business models. 
  • We are seeing a shift in Queensland listed companies towards cyclical equities in Q4 2020: Q4 2020 and the arrival of vaccines has seen a shift away from stocks that were the biggest beneficiaries of COVID (i.e. technology businesses, with the TMT sector market capitalisation declining 0.9% in Q4 2020) towards more cyclical equities such as energy & resources, banks and other FSI businesses which experienced significant increases in market capitalisation during Q4 2020.
  • There are currently 173 companies in the Deloitte Queensland Index, with a total market capitalisation of $97.2b: Following the completion of four IPOs by Queensland companies and the delisting of Virgin Australia as a result of being acquired by Bain Capital, total companies on the Deloitte Queensland Index increased to 173 as at Dec-20.
  • Quarterly Queensland M&A deal volume at its highest since 2016: Queensland M&A deal activity has rebounded strongly in Q4 2020 with 92 announced deals versus 69 in Q3 and 44 in Q2 2020. While in part attributed to the resumption of activity following the delays in M&A as a result of the uncertainty brought about by COVID, transaction volume was also supported by listed corporations active in the Resources sector, particularly gold, and continued activity in the TMT and Industrials sectors.

Published: February 2021

Deloitte Queensland Index Top 100 Companies - December 2020

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