Newcomer Lion gets into top three list

Lion Nathan's move across the Tasman was a winner for the brewer, writes JIM EAGLES.

Recent transtasman migrant Lion Nathan is rated as one of three star newcomers last year on the Australian Stock Exchange.

The latest rankings of Australian Wealth Creators, issued by international management consultants Stern Stewart, identify Lion, Corporate Express and Kaz Computers as the star debutants on the Australian exchange last financial year.

Moving its primary listing across the Tasman appears to have worked well for Lion, which saw its market value added (MVA) - the difference between the capital invested in the company and its market value - increase by 41 per cent to $A1.1 billion in the 12 months.

The liquor sector was one which generally did well in Australia last year.

Lion's larger rival, Foster's, boosted its economic value added (EVA) - its annual profitability after taking into account the cost of its capital - by 150 per cent.

Nevertheless, possibly because that improvement followed some disappointing years, its MVA did not rise quite as sharply as Lion's, although it did climb 37 per cent to $A3.9 billion.

The market expects Lion to do better than Foster's because Stern Stewart's calculations show that 21 per cent of its market value is due to expectations of future growth (FGV) while the FGV component of Foster's is only 9 per cent.

Apart from liquor, the other areas of the Australian market Stern Stewart found to have done well last year were banking, retail, resources and the health and biotechnology sector.

It was an amazing year for Australasian banks which created an extra A$26 billion in market value among them.

National Australia Bank, owner of the BNZ, increased its MVA by 37 per cent to $A29 billion.

Commonwealth Bank, which controls ASB Bank, rose 40 per cent to $A21 billion.

The MVA of ANZ Bank, owner of ANZ in New Zealand, rose 62 per cent to $A15 billion.

Westpac, which owns WestpacTrust, went up by a more modest 20 per cent to $A14 billion. The smaller Macquarie Bank went up 50 per cent to $A6 billion.

Interestingly, that surge in support for banks was not necessarily the result of improved real profitability, because both Commonwealth and Macquarie achieved markedly worse EVA than in the previous year.

Rio Tinto led the upward surge in resource companies, with its MVA soaring by $9.9 billion - giving it top spot in the wealth creation rankings for last year - to $A29 billion. It still failed to cover its cost of capital, but its EVA improved considerably from -$A1.3 billion to -$A465 million.

Western Mining turned in a hugely improved performance for the 12 months - its EVA going from -$A692 million to $A83 million - and as a result its MVA rose by a third to $A5.5 billion.

Star performer in the retail sector was Wesfarmers, whose MVA rose an amazing 323 per cent to just under $A10 billion. As well as expanding by acquiring other home hardware chains, Wesfarmers has also sharply improved its return on capital, its EVA having gone from -$A73.8 million in 1996 to $A29.3 million last year.

The market is clearly expecting it to continue to perform well because the FGV component of its market value has gone from 44 per cent in 2000 to 74 per cent last year.

Millers Retail also did remarkably well. Its MVA increased 143 per cent to $A608 million, which puts it just ahead of Qantas Airways in the wealth creation rankings. Yet, as Stern Stewart points out, to achieve that level of market value Qantas has used $A8.5 billion in capital, whereas Millers has needed only $374 million. So which managers have done the best job for investors?

Another impressive retail performance came from Foodland Associated, owners of New Zealand's Progressive supermarket chain and Farmers, which increased its MVA by 136 per cent to $A452 million.

Harvey Norman, which has extended its chain to New Zealand, had a slight decline in its EVA.

But its MVA improved by 15 per cent because of the general enthusiasm for retailing stocks.

Coles Myer, owner of the troubled Kmart chain in New Zealand, missed out on the retail boom. Its EVA worsened markedly and its MVA improved by only 1 per cent.

In health and biotechnology, standout performers included CSL, sharemarket darling Mayne Nickless - whose MVA soared from $A7 million to more than $A1 billion in just 12 months - Cochlear and Peptech.

But it was a terrible year for technology, media and telecommunications companies, which generally had a tough time all round the world.

Stern Stewart's figures show that the once high-flying sector lost more than $A60 billion in market value during the last financial year.

The seven biggest wealth destroyers in the latest table are all telecommunications and media companies, including News Corporation, Telstra, Cable and Wireless Optus, Publishing & Broadcasting, Hutchison, Powetel and Austar.

News Corporation, which controls INL and Sky TV in New Zealand, dived in value by $A25 billion as a sharp fall in its EVA, from -$A2 billion to -$A4 billion, further undermined investor faith in Rupert Murdoch's ability to make it all work.

Even so, 71 per cent of News' market value is still based on expectations of growth, suggesting there is still plenty of downside unless results improve.

Telstra, the new owner of Telstra Clear in New Zealand, turned in a solid performance during the year, achieving a modest increase in its EVA to $A2.6 billion.

But its FGV fell sharply as the market downgraded telcos generally and recorded concern at some of Telstra's overseas ventures.

Because MVA records wealth creation from a company's inception, News and Telstra are still Australia's greatest wealth creators because of their growth of yesteryear.

Telstra is still ahead by $A51 billion and News by $A37 billion, but their positions are declining rapidly.

Another disaster area was Kerry Packer's PBL, owner of magazine publisher ACP in New Zealand, which was badly hit by a decline in advertising and its disastrous involvement with OneTel. Its MVA nearly halved and $A2.8 billion in wealth evaporated as a result.

Packer's major rival, Seven Network, also turned in a disappointing result but thanks to a surge in investor confidence, which sent its FGV soaring, its market value rose slightly.

APN News & Media, which now owns the New Zealand Herald, also avoided the media slump, its MVA barely changing.

Hutchison, in which Telecom has a major stake, had what Stern Stewart called "a dramatic fall from grace. The company has to date invested vast amounts of capital unprofitably." Its EVA fell sharply during the year and as a result its MVA collapsed from $A1.2 billion to -$A660 million.

Other companies with New Zealand connections did not fare so badly.

Data Advantage, which has since merged with New Zealand's Baycorp, almost doubled its MVA as the market boosted estimates of future earnings, with FGV making up 83 per cent cent of the company's market value.

BHP Billiton, owner of New Zealand Steel, had a greatly improved performance - its EVA going from -$A1007 million to $A271 - but its MVA rose only slightly to $A16 billion as the market nearly halved its expectations of further growth in the merged giant.

Burns, Philp, now run by New Zealand entrepreneur Graeme Hart, is still languishing towards the bottom of the rankings, with a MVA of -$A637 million.

But that is a solid improvement on the previous year, and its EVA and FGV figures also improved, confirming that it appears to be on the way back.

Goodman Fielder, which has largely moved away from its New Zealand origins, turned in a hugely improved EVA and its MVA almost doubled as a result.

But investors obviously remain sceptical about the group's prospects, because at the end of the financial year its FGV was still -$A607 million.

* How did New Zealand's own listed companies fare? The answer to that will be given when Stern Stewart release the rankings of New Zealand Wealth Creators in the Herald next Saturday.