High flying mining stocks have topped our survey of shareholder returns, notwithstanding the recent stockmarket volatility.
Fortescue Metals Group Ltd and Paladin Resources Ltd are two names that are synonymous with the resources boom, and for good reason.
They have grown rapidly over the past five years, rising from ‘penny dreadful’ stocks to be ranked among Western Australia’s top half dozen companies by market value.
The extraordinary growth in their share price has ranked them as the top performing stocks in WA Business News’s sixth annual survey of total shareholder returns.
The survey factors in share price changes, dividend payments and any corporate events, such as a share split or capital return, to calculate the total return that shareholders have achieved over the past five years.
Iron ore developer FMG lifted its share price from less than 10 cents in 2002 to more than $33.00 at the end of June, when data was collected for the TSR calculation.
That equated to a TSR over five years of 38,156 per cent, according to calculations by research group Aspect Huntley, which was commissioned by WA Business News.
Uranium miner Paladin lifted its share price from about two cents in 2002 to $8.26 at the end of June, generating a TSR of 27,424 per cent.
Other companies that feature prominently in the survey have a similar corporate story - they have come from a very low base and ridden the resources boom.
Some of the top performers include uranium explorer Summit Resources Ltd, Strike Resources Ltd, which is looking to develop an iron ore project in Peru, Sphere Investments Ltd, which is planning to develop a giant iron ore project in Africa, and Precious Metals Australia Ltd, which is aiming to reopen the Windimurra vanadium project in the Mid West.
The share prices of these companies have retreated a long way in the past two weeks from the all-time highs they achieved earlier this year.
But the market correction has not changed the overall findings of the TSR survey.
Investors who got on board early have still achieved spectacular gains from stocks like FMG, which is due to start producing iron ore next May, and Paladin, which commissioned its first uranium mine in December.
The recent volatility in global stockmarkets has seen investors opt for the relative safety of blue chip stocks, like Woodside Petroleum Ltd and Wesfarmers Ltd.
These companies will never achieve the spectacular share price gains that the likes of FMG and Paladin have achieved, nor do they carry the same risks.
For the big industrial stocks, aggregate TSR over the past five years ranged up to 291 per cent for Woodside, 256 per cent for Alinta Ltd and 251 per cent for West Australian Newspaper Holdings Ltd. By comparison, Wesfarmers delivered a relatively modest return of 142 per cent.
Reviewing the data for WA’s top 50 stocks highlighted mineral sands miner Iluka Resources Ltd’s poor long-term performance, with a five-year TSR of just 54 per cent. New chief executive David Robb was recruited from Wesfarmers last year to improve Iluka’s performance.
The data also highlighted some well-known stocks that had been top performers but have struggled to sustain high returns.
Great Southern Ltd, which has been battered by changes to the tax treatment of managed investment schemes, had an aggregate three-year TSR of just 18.8 per cent, while caravan and park home manufacturer Fleetwood Corporation Ltd, which underwent a major restructuring during 2005, had a three-year TSR of 41 per cent.
These numbers indicate the challenge facing companies seeking to sustain high returns over a long period of time.
Applecross-based engineering and construction company Monadelphous Group Ltd stands out as a mature, profitable company that has performed exceptionally well, in both absolute terms and relative to its peers like Macmahon Holdings Ltd.
Its share price rose to $14.57 at the end of June, equating to a five-year TSR of 2,887 per cent.
The TSR survey found that the proportion of listed WA companies delivering a positive return increased last financial year, as would be expected during a strong stockmarket rally.
About 75 per cent of listed WA companies achieved a positive return last year, up from 60 per cent in the previous year. Over a three-year period, about 80 per cent of listed WA companies delivered a positive return, up from 70 per cent.
