QR National – be part of something thats a big disappointment

Disclaimer:

This valuation is NOT advice and provided as educational only (usually mine), it does not take into account your specific investment objectives, financial situation or financial needs. Before acting on the information you should consider if the analysis is accurate (it probably isn’t) and if the investment is appropriate for your investment needs. You need to also consider your financial situation and you should seek advice from a financial adviser and/or stockbroker.

I can give no guarantee of the accuracy of the information used, omitted, provided or considered in this analysis.

Or to put the information simply:

You should expect my analysis to contain mistakes and omissions, I’m not a professional stock picker nor do I hold an Australian Financial Services License. My work is merely for self education and should not be acted on by any persons (sane or insane) in any location so please don’t sue me.

 

As your aware I’ve been awaiting the QR National float for quite sometime with the intention to put a maximum of 50% of my portfolio into the stock.  For those that want the short answer, I plan on putting in a big fat $0.

Normally Government floats are a great investment for atleast a few years (think TLS in the early days). They are usually cheap, monopolistic assets, have a virtually guaranteed high dividend yield and provide a great opportunity for capital growth.

After wading through the massive prospectus (mostly a sales presentation) I have the following thoughts:
QRNational’s dividend yield is tiny
It is priced on a PER around 19 – aka not cheap (all ords average is 14).
The business needs massive capital investment in the short term
The forecasts look to high and efficiency gains look optimistic to me (I’m happy to be proven wrong)
It is being pitched as a growth stock and to me it doesn’t appear so.  The main revenue drivers will come from the price of coal, China growth and not QR’s ability to grow organically.

The stock my stag on listing based on the hype but over the long term there could be a different story.  At the time of writing you can buy Woolworths (with reliable income streams at a per of 17).

Regards,

Trav

Travis Lepp is an apple fan and managing director for http://www.enunc8.com. Enunc8 specialises in consolidating MYOB, Quicken and disparate Data in addition to web based analytics and reporting.

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