Comparative review

Asciano’s security price has fallen 8% since we ceased coverage on 5 Jan 12 (Coverage Ceased – $4.66), even with revenue increasing 11% to $3.4bn and earnings per share increasing 43% to 25 cents in 2012. Despite owning monopolistic assets, the company has a lousy track record, competition is increasing in several key markets and its still spends more on annual capital expenditure than it makes in net profit each year. Return on capital, assets and equity remain poor, and the meek 1.8% dividend yield holds little attraction. AVOID.

The share price of Qube Logistics has fallen 14% since reaching a record high of $1.79 in March. While the company is thankfully no longer externally managed, returns on capital and dividends will remain low while the company is expanding so aggressively. Over the past 18 months Qube has raised capital and increased debt levels to make several acquisitions, and we’re cognisant that building a robust business takes time. While boasting Chris Corrigan as chairman provides a level of comfort, there’s no guarantee that the spending spree will pay off. Unless the company can produce returns on capital much closer to 10% we’re unlikely to pay more than book value, which is well south of the current share price. Qube is one for the watchlist. AVOID.