Business SummaryQube Holdings Limited (QUB) is an integrated provider of import and exportlogistics services. Group is involved in the management, development andoperation of strategic properties with future development potential intologistics facilities. QUB operates in three divisions covering Automotive, Bulkand General Stevedoring, Landside Logistics and Strategic DevelopmentAssets.

Port & Bulk: The division comprises Qube's wholly owned operations, QubePorts & Bulk, as well as Qube's associates Australian AmalgamatedTerminals Pty Limited (50%), Northern Stevedoring Services Pty Ltd (50%)and Prixcar Services Pty Ltd (25%). The division's port activities involve theprovision of a range of services for passenger, agricultural and miningvehicles. Services include stevedoring of the vehicles from the vessels,storage of the vehicles, processing, inspection and delivery to the endcustomer. Qube's bulk activities are aimed at offering customers acomprehensive logistics solution from mine to port to ship covering activitiesincluding transport, stockpile management, warehousing, bulk out-loadingand stevedoring.

Logistics: The division comprises Qube's wholly owned operations, QubeLogistics, as well as an associate of Qube Logistics, Mackenzie Hillebrand(50%). The primary focus of Qube Logistics is to provide a range of servicesrelating to the import and export of containerised cargo.

Strategic Assets: The division comprises Qube's interest in the MoorebankIndustrial Property Trust (MIPT) (66.7%), a strategically located property atMinto in Sydney's south west (100%) and Qube's 39.9% interest in theQuattro Grain joint venture and a 50% shareholding in TQ Holdings PtyLimited, a joint venture with Japanese petroleum group JXTG Group. TheQuattro Grain joint venture has started construction of new grain storage andhandling facility at Port Kembla in New South Wales.

Acquisition Qube successfully completed the acquisition of Aurizonsminority interest in MIPT (33%), a 50% interest in Patrick Terminals and theremaining 50% interest in Australian Amalgamated Terminals (AAT) InDecember 2016.

Latest ResearchBalance Sheet Optionality to Help Navigate A Weaker Outlook

Upgrade to Buy/High Risk TP: $2.75 — We upgrade our recommendationon Qube

Holdings from Sell to Buy/High Risk with a $2.75 price target ($2.80). OurEPS forecasts decline ~4% in FY20e; ~22% in FY21e and ~20% in FY22edue to a higher share count and lower expected volume growth for Qube’sOperating Division. We think the de-risked balance sheet (gearing at~28%), path for value realization around Moorebank and sale of non-coreproperty assets (Minto), scope for strategic accretive acquisitions and costcontrols will generate value for shareholders. We forecast a 3-year EPSCAGR of ~12% to FY22e, which will rely on further uptake at Moorebank.

For more information see research 4 May 2020.

GICS - Transportation

Qube Holdings Limited

ASX Code: QUB Price: $2.86 12 Mth Target Price: $2.71 Rating: Buy - High

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Snapshot

DateMarket Cap.Shares on issue12 Month High12 Month Low

11 June 2020$5,387m1,883.5m$3.57$1.67

RatingRating12 Mth Target Price

Capital GainGross Yield

Implied Total Return

Buy - High Risk$2.71-5.2%2.5%-2.8%

Investment FundamentalsFYE 30 Jun 2019A 2020F 2021F 2022F

Profit $m 101.0 106.0 130.0 164.0Profit (norm)* $m 101.0 106.0 130.0 164.0

EPS* ¢ 6.0 6.0 7.0 9.0EPS Growth % 0.0 0.0 16.7 28.6P/E* x 47.7 47.7 40.9 31.8P/E Relative % 0.0 0.0 0.0 0.0

DPS ¢ 7.0 6.0 5.0 7.0Yield % 2.4 2.1 1.7 2.4Franking % 100.0 100.0 100.0 100.0* Adjusted for goodwill and unusual itemsSource: Based on Citi estimates

Share Price Chart

Total Return on $10,000 Investment

Profit & Loss ($M)2015A 2016A 2017A 2018A 2019A

Sales Revenue 1,393 1,265 1,418 1,578 1,621Total Revenue ex. Int. 1,459 1,332 1,513 1,770 1,839EBITDA 330 268 235 272 454Depreciation & Amort. -104 -102 -113 -116 -120Goodwill Amortisation -- -- -- -- --EBIT 226 166 121 156 334Net Interest -25 -32 -13 -15 -33Profit Before Tax 201 134 109 141 302Income Tax -32 -36 -27 -88 -88Outside Equity Int. -10 -10 -- 0 1Profit after Tax 159 88 81 54 214Significant Items after Tax -73 -6 -4 146 -18Reported Profit after Tax 86 82 77 199 197Preferred Dividends -- -- -- -- --

Cash Flow ($M)2015A 2016A 2017A 2018A 2019A

Receipts from Customers 1,575 1,468 1,537 1,720 1,871Funds from Operations 239 236 200 230 305Net Operating Cashflow 170 182 205 206 259Capex -206 -107 -96 -195 -330Acquisitions & Investments -130 -56 -374 -214 -112Sale of Invest. & Subsid. -- -542 1 28 -157Net Investing Cashflow -329 -694 -797 -363 -582Proceeds from Issues 1 494 657 -- -4Dividends Paid -47 -54 -57 -84 -134Net Financing Cashflow 137 500 706 70 358Net Increase Cash -23 -12 114 -87 35Cash at Beginning 112 88 77 191 104Exchange Rate Adjust. -1 0 -- -0 1Cash at End 88 77 191 104 140

Ratios and Substantial Shareholders2015A 2016A 2017A 2018A 2019A

Profitability RatiosEBITDA Margin % 23.66 21.16 16.55 17.24 28.03EBIT Margin % 16.22 13.13 8.55 9.89 20.62Net Profit Margin % 11.43 6.95 5.73 3.39 13.21Return on Equity % 11.39 4.53 3.11 1.95 7.61Return on Assets % 8.05 3.99 2.90 2.04 5.39

Debt/Safety RatiosNet Debt/Equity % 34.52 29.27 23.39 31.35 48.21Interest Cover x 8.97 5.17 9.63 10.40 10.22

Top 5 Substantial ShareholdersCanada Pension Plan Investment Board 8.4%Cooper Investors Pty Limited 6.2%Vanguard Group 5.0%

Balance Sheet ($M)2015A 2016A 2017A 2018A 2019A

Cash & Equivalent 88 77 191 104 140Receivables 208 204 279 296 327Inventories 2 2 2 2 4Other Current Assets 13 546 22 25 35Current Assets 311 829 494 427 507Prop. Plant & Equipment 789 828 907 1,007 1,315Intangibles 635 631 782 834 864Other Non-Current Assets 14 546 366 354 336Non-Current Assets 1,991 2,063 3,189 3,608 4,241Total Assets 2,302 2,892 3,682 4,035 4,748Interest Bearing Debt 602 673 802 966 1,496Other Liabilities 212 181 268 319 438Total Liabilities 814 854 1,070 1,285 1,934Net Assets 1,488 2,037 2,613 2,750 2,813Share Capital 1,285 1,782 2,450 2,455 2,467Reserves -29 -10 -3 19 12Retained Earnings 141 166 165 277 336Outside Equity Int. 91 98 -- -0 -1Total Shareholders Equity 1,488 2,037 2,613 2,750 2,813

Current Analyst Recommendations *

* Source: Morningstar. This chart shows the spread of recommendations from thosebroker analyst's in Australia with research coverage of this stock.

Principals & DirectorsPrincipals

Company Secretary Mr Adam JacobsMr William Hara

Directors

Mr Samuel Kaplan(Non-Executive Director,Non-Executive DeputyChairman)Mr John Stephen Mann(Non-Executive Director)Mr Maurice James(Managing Director)Mr Allan Davies(Non-Executive Director,Non-Executive Chairman)Mr Ross Andrew Burney(Non-Executive Director)Mr Peter Alan Dexter(Non-Executive Director)Ms Susan (Sue) Joy Palmer(Non-Executive Director)Mr Age Sturtzel Holm(Alternate Director)Mr Alan Laurence Miles(Non-Executive Director)

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Qube Holdings Limited

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