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Date Posted: Monday, November 29, 06:04:51am
Author: gamble
Subject:

QR on track – but is the bridge out?
by Michael Pascoe
posted on Nov 26 05:48pm
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Michael PascoeThere's no denying the QRN listing went better than expected, with shares trading above $2.80 on Friday. But before the brave get too cocky, it's worth remembering those risks remain.This week's QR National float has left plenty of egg on the faces of local doubters - me included - but the train has only just left the station, with many a challenge before reaching its destination.

There's no denying the QRN listing went better than expected, with shares trading above $2.80 on Friday, creating a very nice potential profit for retail shareholders who were game to buy them for $2.45 in the IPO, a fine reward for the risk of being prepared to put down money for shares at an unknown price, at a high price/earnings ratio and based on management suddenly performing much better as a privately owned company than it has as an arm of government.

But before the brave get too cocky, it's worth remembering those risks remain. Nothing has changed with QRN except that the Queensland government doesn't quite own the majority of shares. Yes, the train is on track, but is the bridge further ahead capable of handling the load?

Plenty of shuffling

There's also plenty of shuffling going on with the share registry as funds managers of one sort or another are forced to buy shares. Index exchange-traded funds (ETFs) have to hold about the same percentage of QRN in their portfolios as QRN's weighting on the ASX. And there are plenty of "active" funds managers who aren't game to stray very far from the index either. Some would have been holding off, hoping to be able to buy in for a lower price than the book build, but must now jump in anyway.

Once that is sorted out over the next few months, QRN will get down to being judged on its performance. And hanging over the price for a long time yet will be the big 40 per cent of it still owned by the Queensland Government. That means there are key bridges of unknown strength ahead.

Basically, I still think QRN was and is priced on the assumption that everything goes absolutely right - and things don't always go absolutely right when there's major workforce reform required plus a lot of capital works and delicate negotiations with key customers.

If you're feeling regret about not taking part in the IPO gamble, it could be a bigger mistake now start running after the train that's left the station. There's a good chance it will slow down further along the journey.

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