Disruptor or Beneficiary?

A discussion by Ian Hardy, Portfolio Manager of Private Portfolio Managers

A discussion with Qube Managing Director, Maurice James 

There has been much market talk about the potential effect of Amazon entering the Australian market and the impact this might have on retail sales, industrial real estate, transport and logistics and the supply chain generally.

In the investment community Qube Holdings Limited (QUB) has been mentioned as a potential beneficiary. Qube’s Managing Director Maurice James recently presented to a PPM luncheon forum and discussed both Qube’s strategy and his perspective on Amazon’s announced entry to Australia.

Efficient and effective transport and logistics channels have a significant impact on productivity, competitiveness and profitability. Free trade and the relatively recent growth of internet sales have both relied on advances in how we move goods around the world and across the city, so that they arrive reliably and safely.

Consequently, the importance of port services and logistics to the Australian economy cannot be underestimated. At Private Portfolio Managers, we have spent considerable time and effort, over many years, understanding the transport sector generally, Qube’s predecessor companies in particular and Qube Holdings. In this process we have watched with interest the growth and expansion of Qube. Recently, this has been this has been focused on observing Qube’s very strategic and deliberate approach to the emerging Moorebank Intermodal project as well as their recent acquisition of a 50% interest in the Patricks Ports business, where much of the current management team were originally employed.

The luncheon with Mr James fortuitously, as it transpired, coincided with the recent Qube equity raising of some $350 million, part of which will be used to begin development of warehousing in the new Moorebank Intermodal Park. Mr James explained the history of the 243 hectare site at Moorebank and how it will be the largest intermodal freight facility in Australia. The development includes an import- export rail terminal connected to the container store docking terminals at Port Botany via the Southern Sydney Freight Line. The import- export terminal will be capable of handling more than 1 million containers per annum. An interstate terminal will also be developed connected to the national rail network capable of handling 500,000 containers per year of freight from regional areas and to Melbourne and Brisbane. Qube will be the owner and operator of both terminals. The site is large enough to accommodate the two terminals and up to 850,000 square metres of warehousing. Qube has all the development and asset management rights. Mr James noted that whilst the plans of Amazon are yet to be revealed he did not believe it would have significant impact on their operations as many other participants in the retail sector continue to invest in efficient warehouse and inventory management solutions.

Additionally, Mr James gave an overview of Qubes other major operating divisions, Ports and Bulk and Logistics. Ports and Bulk has a heritage stretching back 150 years, and with facilities in all Australian capital cities and cargo facilities in a further 24 regional ports, is pre-eminent in its field. Operations consist of on – wharf and port precinct facilities, providing break- bulk services, refrigerated transport, customs and quarantine clearance and heavy haul transport amongst others and as a consequence can service customer needs across a broad mix of industries and critical logistic chains.

Qube Logistics is made up of some 15 intermodal facilities across Australia providing, road and rail transport, warehousing and distribution, container parks and related services. Qube uses 90 plus locomotives, 900 + wagons, 300 lifting machines and in excess of 900 prime movers and can combine them as an integrated solution or tailor them to meet individual client needs. Over the last four years, Qube Logistics has extensively developed and expanded its logistics portfolio and is now Australia’s single biggest provider of logistic services.

Given the importance of moving goods into and out of Australia and the development of the Moorebank Intermodal Park facility, we will continue to closely monitor and maintain our dialogue with this important and growing company and assess their reactiveness to Amazon when it plans are revealed in substance.

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