Upfront I should say that I bought shares in QR National, even though it is an oxymoron. It seemed the smart and the right thing to do.
As a liberal I’m all in favour of government concentrating its assets on those things that the market can’t do, and capital running businesses. QR National is not the sort of thing a government should be doing, and the prospectus proves that when you look at all the inefficiencies the business has.
As an investor, I’m all in favour of trying to buy shares cheaply and selling them expensively, and I prefer shares which have substantial cashflows. QRN certainly has the cashflows, and a combination of factors made the shares relatively cheap. And courtesy of poor government management as well as business prospects, those cashflows should increase.
There were a lot of reasons for the shares to be cheap. It was a large float, and the government was a more than willing seller.
There was the comparison with Telstra which trades below its various issue prices.
There was the opposition from the unions, which was fed into many media stories.
There was the attempt by Australian institutions to game the stock and push its price down, because, as a top 50 company, they are all going to have to buy stock in it.
And there was the opposition from the Liberal National Party.
None of these factors should have counted against the stock, but they did to some degree.
Looked at more closely, they don’t stand-up.
The Telstra story is not an exact fit. Telstra was always going to be under competitive pressure and the government was always going to force phone charges lower once it had sold all its shares. QR doesn’t fit that profile.
The noise from the unions should have been discounted, and the Australian Institutions, rather than pushing the price down and being able to buy more cheaply after the listing find themselves having to buy shares more expensively as the price has appreciated close to 10% as of today. Foreign institutional investors who bet against the locals must be laughing, particularly the UK Children’s Investment Fund and the US Scout Capital.
All of which leaves the Queensland LNP in a difficult position. The government now has the sale proceeds, succeeded when everyone said they couldn’t and the LNP has no answer to the question of how they would fund the state without the sale.
Which should be a lesson to them to stick to their principles, but I’m beginning to wonder what they are.
Certainly the link between belief in free enterprise and the Liberals seems to be very weak in Queensland. Not only did the LNP oppose this sale of one transport related company, but at the Brisbane City Council level Campbell Newman is proposing to buy Queensland Motorways, another transport related company which is the operator of the Logan Motorway, Gateway Motorway and the Port of Brisbane Motorway, and valued at $3B. The current owner? You guessed it, the Queensland Government!
Would I put my own money into this investment? I might, given the right price and situation, but I wouldn’t put the public’s money into it because that is not what it is for. If the public wanst shares in a motorway operator they can pay for it themselves, which is what any proper liberal would say.
Makes you wonder who’s who in the zoo these days, and who your should vote for.