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Deloitte SA Index outperforms ASX 200 in March quarter 2016

Strategic acquisitions to drive future growth in South Australia

9 April 2016: The Deloitte South Australian (SA) Index decreased by 1.2% in the 2016 March quarter, but still significantly outperformed the ASX 200 for the three months to 31 March 2016, which saw a 4.0% decrease.

The absolute total market capitalisation of the state’s 63 listed companies increased by $1.37 billion (6.33%) during the March quarter, from $21.60 billion to $22.97 billion. Approximately half of this increase was attributed to Beach Energy Limited after it finalised its merger via a scheme of arrangement with DrillSearch Limited.

Deloitte Corporate Finance partner Stephen Adams said: “Both indices fell sharply in January and February before recovering in March to end the quarter on an upward trend.”

The recoveries from South Australia’s largest listed energy and resources companies, including Santos Limited, Beach Energy Limited and OZ Minerals Limited, helped offset the substantial falls of some other larger companies in Argo Investments Limited and Elders Limited.

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Percentage change to 31 March 2016

Throughout the 12 months to 31 March 2016, a number of South Australian companies have publically announced their intent to undertake acquisitions to build on organic growth which is being achieved in a generally challenging environment.

Adams said: “With uncertainty in global and domestic markets ever present, established South Australian companies have sought to supplement organic growth via mergers and acquisitions (M&A) and we note strong support from Equity Capital Markets for these companies pursuing strategically aligned acquisitions.

“We expect strong M&A activity to precipitate growth in the South Australian economy in 2016, and in the past six months, there have already been a number of acquisitions made by locally listed companies.”

The largest of these include Beach Energy Limited’s merger via scheme of arrangement with DrillSearch Limited and SeaLink Limited’s acquisition of Transit Systems Pty Ltd for $125 million.

A number of others have announced their acquisition intentions, including Adelaide Brighton Limited, Mayne Pharma Group Limited, OZ Minerals Limited, Prophecy International Holdings Limited, and Beston Global Food Group Limited.

“Many of these are currently holding large amounts of cash on balance sheets, have unutilised debt facilities or have demonstrated an ability to perform necessary capital raisings if required,” Adams said.

“It is expected that strong inward M&A activity into South Australia will also create positive ripple effects into the local economy, which will assist the state’s ambition of supporting growth via investment and innovation in industry sectors where South Australia holds a natural competitive advantage, such as Agribusiness (and AgriTech) and Education.”

Major SA ASX company movements

Santos Limited was the biggest positive contributor to the Index, with its share price increasing by 9.5%, and market capitalisation to $7.12bn.

On an absolute share price performance basis, the largest percentage share price increases for the three months to 31 March 2016 were recorded by:

  • Core Exploration Limited – up 142.9%, from $0.014 per share to $0.034 per share
  • Petratherm Limited – up 133.3%, from $0.003 per share to $0.007 per share
  • Ramelius Resources Limited – up 94.9%, from $0.195 per share to $0.38 per share.

Companies that recorded the largest percentage share price decreases were:

  • Hillgrove Resources Limited – down 65.6% (market capitalisation of $10.35m)
  • Marmota Energy Limited – down 29.2% (market capitalisation of $6.7m)
  • Reproductive Health Sciences Limited – down 28.0% (market capitalisation of $5.7m).

IPOs, Index Additions and Removals

One company was added to the Index in the March 2016 quarter:

  • Investigator Resources Limited (relocation from Queensland).

Two companies left the Index:

  • Crest Minerals Limited (reverse takeover by The Food Revolution Group)
  • MCS Services (change of registered office to Western Australia).

See the full company-by-company breakdown of the Deloitte SA Index here.

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