winners on the asx

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    Winners on the ASX
    From: By Tim Blue
    November 30, 2005

    WITH a collection of big industrials and selected small caps, investors in the past year could have steered their portfolios into one of the smoothest and fastest-climbing cycles of the Australian financial markets.

    The Australian's 10th annual Shareholder Scorecard, compiled in association with L.E.K. Consulting, shows many of the companies that produced the most generous returns for their shareholders in 2005 are those that catered to our basic needs – energy, transport and industrial resources.

    Investors had to choose carefully in these sectors as not all stocks were winners. Telstra (tls.ASX:Quote,News), for example, had an ordinary year and seems to become more ordinary as times goes by.

    Sino Securities led the pack and recorded a total return for the year of 1378 per cent, while another, Karoon Gas, returned 930 per cent.

    These returns are remarkable as that they are not interest-rate driven in the same way that, say, the banks and financial services sector generally are.

    The winners included an ample helping of unsung names, companies that went for years without a mention in the news media. Paladin Resources recorded a total return in the year of 770 per cent, while another, Summit Resources, returned 640 per cent.

    "The market has returned to the heady days of earlier booms, such as the nickel boom of the early 1970s and the dotcom boom in the late 1990s," says Colin Smith, senior partner of the Australian offices of L.E.K. Consulting, the global business strategy firm that compiled the rankings in this report.

    "Much of the share price growth has already been built into share prices, with expectations of significant growth in their profitability.

    "The challenge for future returns is where future profit growth will come from."

    Shareholder Scorecard is a ranking of 745 major companies in 24 industries. Drawn from the Australian Stock Exchange, the companies evaluated are those with a market capitalisation at year end of $20 million or more. These companies had a total stock market value of $950 billion at the end of the 2004-05 financial year.

    The report seeks to identify some of Australia's best and worst-performing companies in terms of how well or badly they treated their shareholders over one-year, three-year, five-year and 10-year periods through to the end of June, 2005.

    The rankings are based on total return, which includes changes in share price as well as reinvested dividends or other distributions. It happens to be the measure most commonly used to gauge the performance of managed funds, whose return is a combination of price gains and all distributions. Performance figures over multi-year periods are compound annual average returns.

    Against the background of their company's performance, it is not surprising that the pay packets of chief executives are a matter of rising concern for shareholders. Perhaps it is simply that tougher disclosure requirements introduced by the ASX have made the investing public more aware of the dollars at the top.

    Perhaps, too, the trend will continue, yet as the Australian Shareholders Association has reported, many more companies are seeking approval of how salary packages are disclosed in annual reports and ASX announcements.

    Shareholders have now gained influence to ensure their boards hear what they have to say.

    Calculations for this special report are by L.E.K. Consulting, a global business consulting firm that specialises in growth strategy, mergers and acquisitions and shareholder value.

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