The State of the Deal and the Deloitte Queensland Index

Analysis

The State of the Deal and the Deloitte Queensland Index – Q4 2021

March 2022

Welcome to The State of the Deal including the 191st edition of the Deloitte Queensland Index, a review of Queensland listed companies on the Australian Securities Exchange (ASX).

Concerns around the impact of the COVID-19 Omicron variant and a shifting macro-economic narrative to one of inflationary pressure and interest rate hikes, saw the Deloitte Queensland Index decrease by 3.5% in Q4 2021, with the total market capitalisation of Queensland-based ASX- listed companies decreasing to $124.1b at 31 December 2021, down from $128.6b at 30 September 2021.

Notwithstanding the slight decline in Q4 2021, the Deloitte Queensland Index recorded an increase of 31.0% during calendar year 2021, significantly outperforming the S&P/ASX All Ordinaries (up 13.0%), and highlighting the resilience and continued recovery of the Queensland economy since the peak of the pandemic.

This was further highlighted by the continued resurgence in Queensland M&A activity, which maintained the momentum that began in the second half of 2020. At its close, 2021 was a bumper year for Queensland M&A, with $16.5b in deals announced (a 60.0% lift on 2020) and volumes of 326 (24.4% above 2020), representing the highest levels since 2016.

Our Queensland Economic Update also considers the potential implications to
the Queensland economy from the escalating conflict and humanitarian crisis
unfolding in Ukraine, and closer to home, the devastating impact of the recent
floods in South East Queensland. 

Key highlights for the December 2021 quarter:

  • The Deloitte Queensland Index declined by 3.5% in Q4 2021: Volatility in global financial markets and the emergence of the Omicron variant in late November 2021, saw a pullback in Queensland-based stocks within the consumer and financial sector, which account for a larger proportion of the Deloitte Queensland Index (with lower levels of company diversification within these sectors). In particular, significant movements in market capitalisation were recorded by:
    • both of Queensland’s largest financial services organisations, Suncorp Group Limited (ASX: SUN) and Bank of Queensland Limited (ASX: BOQ), which ended the quarter down 12.4% and 13.2% respectively;
    • travel and leisure stocks including Flight Centre Travel Group Limited (ASX: FLT) and Corporate Travel Management Limited (ASX: CTM), down 17.9% and 7.6% respectively;
    • consumer stocks including Domino’s Pizza Enterprises Limited (ASX: DMP) and Eagers Automotive Limited (ASX: APE), down 26.4% and 10.5% respectively.
  • We continued to witness a shift in the composition of the Deloitte Queensland Index towards Energy & Resources companies during Q4 2021: buoyed by the global economic recovery from the pandemic and the impact of constrained supply chains, commodity prices continued to rise throughout 2021. In particular, lithium spot prices surged to record highs in Q4 2021, boosted by limited supply and strong demand from the electric vehicle industry – with Queensland-based lithium producers Allkem Limited (ASX: AKE, formerly Orocobre Limited) and Novonix Limited (ASX: NVX) both featuring in Queensland’s top performing stocks in Q4 2021.
  • Queensland M&A activity has continued to steadily accelerate in 2021 to exceed pre-pandemic levels: fuelled by a number of factors such as the availability and low cost of debt, increased market confidence, significant levels of capital to deploy (particularly across highly active private equity bidders), and pent-up demand from a shortage of opportunities, 2021 was a record year for Queensland M&A in both overall M&A deal value and volume.

Previous editions :

December 2021

June 2021

Feb 2021

November 2020

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

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