Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

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Equity Capital Markets

Qube Holdings will raise AUD 350 million of equity to help fund Moorebank and other growth initiatives. AUD 122 million will be raised from an institutional placement and AUD 228 million will be raised from a one for 15 accelerated non-renounceable entitlement offer to existing shareholders at a price of AUD 2.35 per share, with the ability to apply for additional shares up to 100% of an investor's entitlement, subject to scale back. The equity raise is too small to dilute our unchanged AUD 2.60 fair value estimate. There is no change to our positive long-term view on Qube, as its astute management team builds an efficient, vertically integrated logistics company. We recommend taking up entitlements assuming that is in line with your individual investment goals. The retail entitlement offer closes June 21, 2017.Of the funds raised, AUD 80 million is targeted for construction of initial warehouses at Moorebank, AUD 70 million is earmarked for other approved growth projects, and the rest will go to reducing debt until needed. Gearing falls from 30% to 19% following the offer, well below the target range of 30%-40%, providing substantial capacity to fund these and other growth initiatives.Construction of initial warehouses at Moorebank will begin early 2018, with one to be for Qube itself. The firm is in advanced discussions with other potential tenants and should be in a position to announce contracts shortly. This initial investment is just the tip of the iceberg, with management estimating AUD 800 million will be needed to build all warehouses at Moorebank. We believe Qube has sufficient debt capacity and operating cash flow to fund the rail infrastructure and equipment needed at Moorebank, but funding for remaining warehouses could require another equity raising down the track. This doesn’t worry us as these should be attractive investments. Alternatively, Qube could opt to get third parties to co-invest in the warehouses as there should be strong interest once tenants have pre-committed. The approved growth projects include new locomotives, warehousing at Altona, facility upgrades at Minto to support an automotive logistics hub, equipment for new contracts and land near the port in South Australia used by Qube Logistics. These also appear to be worthwhile investments.Analyst: Adrian Atkins

Qube Holdings will raise AUD 350 million of equity to help fund Moorebank and other growth initiatives. AUD 122 million will be raised from an institutional placement and AUD 228 million will be raised from a one for 15 accelerated non-renounceable entitlement offer to existing shareholders at a price of AUD 2.35 per share, with the ability to apply for additional shares up to 100% of an investor's entitlement, subject to scale back. The equity raise is too small to dilute our unchanged AUD 2.60 fair value estimate. There is no change to our positive long-term view on Qube, as its astute management team builds an efficient, vertically integrated logistics company. We recommend taking up entitlements assuming that is in line with your individual investment goals. The retail entitlement offer closes June 21, 2017.Of the funds raised, AUD 80 million is targeted for construction of initial warehouses at Moorebank, AUD 70 million is earmarked for other approved growth projects, and the rest will go to reducing debt until needed. Gearing falls from 30% to 19% following the offer, well below the target range of 30%-40%, providing substantial capacity to fund these and other growth initiatives.Construction of initial warehouses at Moorebank will begin early 2018, with one to be for Qube itself. The firm is in advanced discussions with other potential tenants and should be in a position to announce contracts shortly. This initial investment is just the tip of the iceberg, with management estimating AUD 800 million will be needed to build all warehouses at Moorebank. We believe Qube has sufficient debt capacity and operating cash flow to fund the rail infrastructure and equipment needed at Moorebank, but funding for remaining warehouses could require another equity raising down the track. This doesn’t worry us as these should be attractive investments. Alternatively, Qube could opt to get third parties to co-invest in the warehouses as there should be strong interest once tenants have pre-committed. The approved growth projects include new locomotives, warehousing at Altona, facility upgrades at Minto to support an automotive logistics hub, equipment for new contracts and land near the port in South Australia used by Qube Logistics. These also appear to be worthwhile investments.Analyst: Adrian Atkins

Corporate Action: Small Equity Raise to Help Fund Qube's Growth; Take Up Entitlements