Qube Holdings (ASX:QUB) shares have generally performed well over the last 12 months, reflecting: i) An improving EPS growth profile, ii) The majority of QUB’s key markets showing a positive outlook and iii) Additional contribution from recent acquisitions.

We recently researched QUB in The Dynamic Investor following the release of results for the 12 months to 30 June 2025 (FY25). While the FY25 results were in line with consensus estimates, the shares have fallen sharply since the results release in August.

Accordingly, we consider whether there is scope for a recovery in the share price from current levels.

About Qube Holdings

Qube Holdings provides comprehensive logistics solutions across multiple aspects of the import-export supply chain. The Company’s Operating Division comprises two core business units: Logistics & Infrastructure and Ports & Bulk.

QUB also owns a 50% interest in Patrick, which is an operator of container stevedoring services in Australia’s four largest container terminal ports.

Key Fundamental Drivers

Mixed Outlook for Operating Division

The Company anticipates earnings or its Operating Division to see “solid” earnings growth in both business units. Earnings for Logistics & Infrastructure will be boosted by the inclusion of a full-year contribution from the acquisition of MIRRAT and agricultural activity growth.

However, performance for the Ports & Bulk business is less certain and will likely depend on Resources ⁄ Bulk commodities performance which has been mixed in FY25. The lost earnings from industrial action in the Australian Ports division (2H25) will be non-recurring and thereby provides some underlying earnings improvements benefits to offset any near-term weakness.

EBITA growth for Ports & Bulk is expected to be more modest than Logistics & Infrastructure, driven by stronger energy and bulk scrap volumes. This is expected to be partially offset by softer resources volumes from customer mine closures during FY25 and the cessation of the BHP Olympic Dam contract in September 2025.

Patrick Proving a Consistent Performer

Patrick (QUB: 50%) benefitted in FY25 from an increase in market volumes (lifts) in the period of ~3.4% compared to FY24. In addition, Patrick generated productivity improvements and a favourable volume mix, resulting in a higher quality of both quayside and landside revenue.

These factors enabled Patrick to deliver EBITDA growth. This is despite the normalisation of Patrick’s market share to around 42% from approximately 47% in FY24 when Patrick’s major competitor was impacted by industrial action. At one stage late in FY24, Patrick’s market share reached 50%, predominantly due to the impact of industrial action at competitor DP World. Patrick’s ability to efficiently handle these higher volumes reflects the benefits from the substantial investment in landside infrastructure and equipment that Patrick has and continues to undertake.

Patrick also finalised a three-year enterprise agreement extension prior to the December 2025 expiry, with no industrial disruption.

Making Progress Towards Return Target

Around 12 months ago, the Company lifted its Return on Average Capital Employed (ROACE) target from 10% to 12% over the medium term. ROACE for the group was 10.9% in FY25 (unchanged from FY24).

Continued improvement in margins and ROACE in recent periods highlights QUB’s disciplined approach to investment and operational leverage from its infrastructure and other strategic assets. There is scope for the ROACE to improve towards the revised 12% target. Key drivers include:

i. A significant portion of capital begins to generate a higher rate of return. These include the two MLP Terminals, new locomotives and wagons not yet operational, the strategic acquisition of the Narrabri property and infrastructure assets and several sheds and warehouses under construction.

ii. Selling assets with minimal impact to earnings also provide a ROACE tailwind for QUB and capacity to invest. Asset sales continued in FY25 and QUB expects to achieve a further $120-140m of asset sales in FY26.

Gearing Becoming Stretched

QUB’s balance sheet remains moderately geared (on a net debt to [net debt + equity] basis), at 33% as at 30 June 2025. However, with guidance for increased CAPEX in FY26 (QUB has provided guidance for $600-650m), gearing is expected to rise further over the next two years. This is because free cashflow will be more constrained as a result of the additional CAPEX required.

Fundamental View

We highlight several factors supporting a cautious view on the shares:

i. QUB shares are currently trading on a 1-year forward P/E multiple of ~23.5x. This is considered relatively unappealing in the context of an EPS growth profile of +12% over FY25-28 on a CAGR basis.

ii. The shares are also currently trading a discount of only ~7% to current market valuations.

iii. Weak cash generation (from elevated CAPEX requirements) is limiting the opportunity for capital returns to shareholders (typically a key catalyst for the shares).

Charting View

QUB has been trading in a channel for the past two years. It is now at the bottom of that channel so we need to see evidence that it will hold support here. If it falls out of this channel, then that would lead to cheaper levels. The next level of support down from here is near $3.80.

 

Michael Gable is managing director of Fairmont Equities.

 

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