This share offer worth AUD 5 billion dollars is complete ‘junk’. It is hardly different to those ‘junk’ derivatives that led to the global financial crisis of 2007. Like those worthless securitised property derivatives this Corporation has been grossly over valued. Only more heinous this QR National offer is marketed directly to ‘Mum and Dad’ retail investors rather than faceless corporate professional investors.
After reading through the QR Nat share offer prospectus and crunching some numbers the over valuation of this Corporation becomes acutely obvious to any layperson.
For example in the hypothetical that you invested AUD$1.00 in the financial year of 2010 in a five billion dollar share offer you would have earned a total of 4.0cents in profits. In the hypothetical that you invested your AUD$1.00 in QR Nat in the financial years of 2008 and 2009 your return on investment would have been 1.98cents and 2.8cents respectively. In the years between 2008 and 2010 the RBA calculates inflation at 4.4%, 1.8% and 3.1% respectively. So, had you invested money in any of these hypothetical share offers your miniscule profits would have lost out to inflation.
The RBA’s cash rate for this same period has fluctuated between 7% and 4.75%. So, comparatively if you had invested your money in a term deposit at least you would have made money.
The front page of today’s SMH Business Day quotes Deutsche Banks and Macquarie Banks valuations of QR at $2.53 and $2.75 respectively. Many smaller institutions such as Roger Montgomery give a much more realistic evaluation of anywhere between $1.09 and $1.48 per share. Yet the official share offer stands at about $2.80 per share.
The advocates for QR Nat argue that these miniscule returns are sidetracked into irrelevancy because of the potential for immense future profits and significant capital gains. Well in that case an analysis of the QR Nationals financials reveal a finding of total assets equating to 8.574 billion and total liabilities equating to 5.89 billion leaving net assets worth a total of 2.684 billion. Yet the Queensland State Government says that 2.684 billion is worth 5 Billion dollars in shares. In that case I would prefer my AUD$1.00 to remain in the Bank anytime.
