TOP PUBLIC COMPANIES REVEALED

MARCH 2010

Foreign takeovers, spectacular falls and resilient go-getters have changed the rankings of Brisbane’s top public companies dramatically this year. Some changes can be attributed to recovery, others to the lingering effects of a difficult 2009, but it’s hard to ignore that one in five companies are new to the list in 2010.

WITH a competitive advantage in mining and related services, it comes as little surprise that a global upturn in commodity prices is driving growth for a large chunk of Brisbane’s publicly-listed companies.
You have to hand it to them – they’re making all the right moves.

Macarthur Coal jumped eight positions to drill through the top five, with a string of other resource and energy-based companies also surging forward through the list — the market has dictated that this is where the profits lie.

Testament to this is the $3.5 billion takeover of last year’s fifth seed Felix Resources by Chinese company Yanzhou Coal, as well as the recent $431 million takeover of Energy Developments by Greenspark Power Holdings.

But RBS Morgans managing director Brian Sheahan, points to two explorers who are making waves in investor circles at the moment, namely PanAust and Discovery Metals. He says PanAust has done a great job in resolving its debt issues as it ramps up copper production in Lao, while Discovery Metals has attracted a lot of attention from institutional investors for its copper projects in Botswana.

“There’s a shortage of good copper projects around the world so this could be the next one, and it’s a company from Brisbane,” says Sheahan.

“From my point of view, with these small cap companies, the ones that have got the edge are in areas in which Australia is leading – one of those is mining services so that’s your Ausencos, Sedgmans and Industreas.

“Then there’s agriculture, so from Brisbane that’s obviously Australian Agricultural Company, but they’ve had a tough couple of years with a high Australian dollar and management restructuring.”

For Sheahan there have been some standout examples of companies thriving in areas away from the mining and agricultural sectors, either through high quality technological development driven by our education system, or simply good business models.

“Domino’s is an interesting one with Donny Meij – it’s interesting that they expanded into the European market and they’re an Australian company. The fact is, it’s hard to cross international boundaries, especially when cultures are different like in France and Belgium,” he says.

“There’s been little interest in biotech over the last few years, with more focus on mining, but those biotech companies who have been able to survive the drought and have moved forward have really shown their strength as independent companies.

“Biotech companies could be having their day in their sun – you’ve got Alchemia whose product is pre-FDA and Impedimed who already has approval and is just waiting on commercial agreements. I expect good things from the biotech sector.”

McCullough Robertson Lawyers managing partner Brett Heading, says pre-GFC issues of infrastructure constraints are still relevant and Brisbane is always subject to what happens in foreign markets, but like many he is cautiously optimistic.

“The outlook for most industries at the moment is materially better this year than last year,” says Heading.

And he’s seen what can happen to a company on the edge. Heading is also chairman of Trinity Group Limited, which fell through the cracks and didn’t make the list this year.

“Trinity had a near-death experience and it was the function of disfunctionality at a moment when there was high gearing and falling asset values,” he says.

“But we’ve managed to show that Trinity is prepared to make the necessary changes, and I’m quite optimistic for the potential of Trinity to grow its business again and restore its position as a leading Queensland company.”

He highlights that April, May and June last year were horrible for business, but in July ‘the lights went on’ and there’s been month-on-month improvement ever since.

“I’m no expert on resources, but if the activity levels of clients is an example of what’s happening then the mining services sector is having a real growth spurt.”

He says this business confidence will boost the IT sector as well, as companies will be more willing to spend money again to prop up their systems and processes.

“They don’t want to have a blow out in costs. They stripped out expenses during the crisis so they will be very careful not to blow out costs again,” he says.

Heading highlights that residential property and tourism numbers are also coming out of the doldrums, which are both areas where many Brisbane’s top companies have a good deal of exposure.

But while most economic indicators are looking positive, Heading is seeing legal signs that there is still a way to go yet.

“The level of litigation is still strong and if people are preferring to fight rather than move on, it’s still a sign that we’re not out of the woods yet,” he says.