The State of the Deal and the Deloitte Queensland Index

Analysis

The State of the Deal and the Deloitte Queensland Index – Q1 2022

May 2022

Welcome to The State of the Deal including the 192nd edition of the Deloitte Queensland Index, a review of Queensland listed companies on the Australian Securities Exchange (ASX).

Russia’s invasion of Ukraine and the historic coordinated sanctions which swiftly followed from the West, drove significant volatility across global capital markets in Q1 2022, with soaring commodity prices and ongoing supply chain disruptions contributing to a further surge in inflation. Amidst this uncertain backdrop, Queensland equities largely held their ground, with the Deloitte Queensland Index declining by 1.6% in Q1, with the total market capitalisation of QLD-based ASX-listed companies decreasing to $121.8b at 31 March 2022 (down from $124.1b at 31 December 2021).

Notwithstanding the slight decline in Q1 2022, the Deloitte Queensland Index rose by 26.9% in the 12 months to 31 March 2022, significantly outperforming the S&P/ASX All Ordinaries (up 11.0%), and continuing to exceed pre-pandemic levels.

Following a record-breaking year for M&A in 2021, global M&A activity experienced a relatively slow start to 2022, with the escalating conflict in Ukraine and fears of runaway inflation impacting business sentiment, fuelling uncertainty amongst dealmakers. At its close, Q1 2022 saw Queensland deal volumes and values decrease by 13% and 31% respectively compared to Q1 2021.

Our Queensland Economic Update also considers the potential implications to the Queensland economy from the ongoing conflict in Europe, as well as the impact of growing inflationary pressures and rising interest rates on both Queensland businesses and household consumption.

The State of the Deal and the Deloitte Queensland Index - Q1 2022

Key highlights for the March 2022 quarter:

  • The Deloitte Queensland Index declined by 1.6% in Q1 2022: Volatility in global financial markets saw a pullback in Queensland-based stocks within the consumer and TMT sectors, which account for 36% of the Deloitte Queensland Index (albeit with lower levels of company diversification within these sectors). In particular, significant movements in market capitalisation were recorded by:
    • Domino’s Pizza Enterprises Limited (ASX: DMP), which was the hardest hit amongst Queensland listed companies in Q1 2022, finishing the quarter down 25.6% ($2.6b) following the release of its half-year results in February, which reported a 5.3% decline in underlying NPAT (to $91.3m) compared to H1 FY21;
    • The performance of the Queensland consumer sector was partly offset by a recovery in Queensland travel and leisure stocks, with Flight Centre Travel Group (ASX: FLT) and Corporate Travel Management Limited (ASX: CTD) ending the quarter up 11.9% ($0.4b) and 11.5% ($0.4b) respectively; and
    • Heavy falls in technology stocks across most global indices in Q1 2022 was also felt across Queensland TMT companies, with NextDC Limited (ASX: NXT), TechnologyOne Limited (ASX: TNE) and Megaport Limited (ASX: MP1), decreasing by 8.8% ($0.5b), 10.3% ($0.4b) and 25.0% ($0.7b) respectively.
  • We continued to witness a shift in the sector composition of the Deloitte Queensland Index towards Energy & Resources companies in Q1 2022: driven by Queensland-based coal producers, and benefiting from recording-breaking coal spot prices, as sanctions on Russian coal exports resulted in supply shortages as consumers scrambled to secure alternative sources. In particular, Stanmore Resources Limited (ASX: SMR), Coronado Global Resources Inc (ASX: CRN) and New Hope Corporation (ASX: NHC) finished Q1 as the top performing stocks on the Deloitte Queensland Index. Within this edition, our Queensland E&R Update explores further the key drivers of the resurgence in the Queensland E&R sector as well as opportunities for further growth and investment for the State.
  • Queensland M&A activity remains steady in Q1 2022: Despite growing economic headwinds, as well as the potential pause in M&A activity in the lead up to the Federal election in May, optimism remains strong amongst dealmakers with the competition for high quality assets expected to continue.

Previous editions:

Q4 2021

Q3 2021

Q1 2021

Q4 2020

Q3 2020

Deloitte Queensland Index Top 100 Companies List - 31 March 2022

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