Fat city: Queensland’s booming corporates still feasting on commodities
The market value of Queensland’s listed companies reached just shy of $120 billion at the end of the March quarter and outperformed the outperform the ASX All Ordinaries, according to the Deloitte index.
The index, which now measures the value at $119.4 billion, showed a sharp slowdown in mergers and acquisitions that started in 2022 and continued in the March quarter.
Deloitte said the sustained monetary policy tightening from central banks to combat record inflation continued to impact business and consumer sentiment, while recession fears persisted amid some of the largest bank failures since the global financial crisis.
“Despite these headwinds the Deloitte Queensland index rose 1.8 per cent in the first quarter, primarily driven by the state’s consumer sector,” Deloitte said.
Queensland’s consumer sector was the largest contributor of growth in the Index in the first quarter, underscored by strong performances from Lottery Corporation Limited and Flight Centre Travel Group Limited, which both posted the largest dollar increases in market capitalisation since 31 December 2022.
The state-based index has outperformed the ASX All Ordinaries since the peak of Covid.
Deloitte financial advisory partner and Queensland mergers and acquisition leader Rob McConnel said the outperformance highlighted the resilience of the Queensland economy in the face of headwinds.
“Our economy is providing plenty of reasons for optimism with growth extending into the first quarter of 2023 primarily driven by a booming export market for the state’s natural resources, particularly coal, which continue to be supported by favourable, albeit declining, commodity prices,” he said.
“Domestic tourism and household consumption also remains buoyant despite weaker demand growth, fueled by sustained low unemployment and left over savings from a seemingly distant pandemic.”
Following a slowdown in the second half of 2022, Queensland M&A activity remained subdued in Q1 2023. Queensland M&A deal volumes (24 announced transactions) were down 11% compared to Q4 2022 (27 announced transactions), while total announced deal value ($0.8b) was less than a third of Q4 2022 ($2.7b).
“While dealmakers remain cautiously optimistic about the opportunities that the current market presents, there does appear to be continued friction between seller and buyer expectations in respect to values, with higher financing costs weighing on valuations,” McConnel said.
