Is there a scope for these Logistics Companies to see a Comeback- TCL, QAN, SLK, AQZ, QUB?

Summary

• Rising COVID-19 cases in Victoria and NSW appears that the states have entered the second phase of COVID-19. The NSW-Victoria border would be closed from 12:01 am 8 July 2020.
• Transurban Group opened the M8 project in Sydney, giving rise to local employment.
• QAN announced a new, easy, and quick way for earning Qantas Points.
• Alliance Aviation Services raised capital to support its growth initiatives.

As per the data provided by the Australian government on 6 July 2020, the country has reported fresh 140 cases of Coronavirus. Victoria has 127 new cases of Covid-19, while NSW has 10 new cases.

The rising numbers are somewhat an indication that Victoria has entered into the second wave of COVID-19 crisis.

With the increase in the number of cases, the Australian government has decided to close the NSW-Victoria border from 12:01 am 8 July 2020. NSW has imposed the border restrictions to prevent the spread of the virus and protect health and jobs of NSW citizens.

Returning NSW residents would have to go for a 14-day self-isolation. Further, the details related to the authorizations, exceptional situations for freight operations & other critical services, and provisions for residents of border regions would shortly be provided by the NSW government website.

The government has advised all Australians to avoid any non-essential domestic travel. Seasonal workers moving between urban & regional zones are encouraged to self-isolate them for fourteen days.

In this backdrop, let us look at few ASX listed logistics stocks and see their recent development.

Transurban Group (ASX:TCL)

Transurban Group is amongst the largest toll-road operator in the world.

Opening of M8 Project In Sydney:

On 6 July 2020, Transurban Group announced the opening of M8 project, previously known as New M5, in Sydney and it started tolling on the M5 East on 5 July 2020. With the opening of M8’s twin 9-kilometre tunnels - M5 East, amongst the most congested motorway corridors in Sydney, will be beneficial in relieving the traffic in the route.

The company considers that the start of M8 is an essential achievement in the WestConnex project. Once the project gets completed, WestConnex will give motorists with a traffic-light free, 33km motorway network.

In the present scenario, with the ease in the COVID-19 restriction within the country, the company is focusing on supporting those people who lost their jobs or had their working hours reduced due to the pandemic. From July 2020, the company decided to provide up to three months toll credit to people impacted by COVID-19 for the above two reasons. Thus, saving hundreds of dollars of these people who needed support getting back to work.

Qantas Airways Limited (ASX:QAN)

Qantas Airways Limited deals in both domestic and international air transportation services. It is also engaged in the sale of worldwide and domestic holiday tours and related support activities such as catering, IT, ground handling etc.

Qantas Frequent Flyer and Afterpay will launch an exclusive partnership:

On 6 July 2020, Qantas announced that Qantas Frequent Flyer and Afterpay (ASX:APT) would launch an exclusive collaboration under which Qantas Frequent Flyers would be able to earn up to 5,000 Qantas Points by linking their frequent flyer number to the BNPL platform.

Capital Raising:

Recently on 26 June 2020, the company completed ~ A$1,360 million institutional placement and received strong support from the existing institutional shareholders and new investors.

On 2 July 2020, Qantas announced the opening of the share purchase plan under which qualified shareholders have the opportunity to subscribe for up to A$30,000 worth of new fully paid ordinary shares in Qantas without brokerage, commission and transaction cost. Each share is issued at the lower of, A$3.65 per SPP Share or at a discount of 2.5% to the volume-weighted average price of Qantas shares traded on ASX trading 5 days immediately prior to and including the SPP closing date.

The proceeds from the equity raising would be used to support the recovery of the airlines and strengthening the balance sheet.

SeaLink Travel Group Limited (ASX:SLK)

SeaLink Travel Group Limited is the largest integrated land and marine, tourism and public transport service provider in Australia with established operations in London and Singapore.

Rivercity Ferries Secured a Deal:

On 28 June 2020, SeaLink Travel Group announced that its subsidiary business RiverCity Ferries was given the deal as the new operator of CityCat, CityHopper & Cross River Ferry networks. The deal was achieved after a bid, obtaining SeaLink’s first marine public transport deal.

The agreement is for the function of the Brisbane River ferry services along with the upkeep of the vessels & related infrastructure. The services would start from 4 November 2020 for 15 years and would secure around 250 local jobs, plus the operation of 31 vessels & add millions of travellers to the 360 million passengers that the group moves worldwide every year.

Alliance Aviation Services Limited (ASX:AQZ)

Alliance Aviation Services Limited is the premium air charter operator in Australia that offers devoted contract, charter and aviation services helping the resource, tourism, and MICE industries along with various other group travel needs. Though Covid-19 has made survival for airlines an everyday fight, AQZ continued to operate profitably due to its diverse business model.

Capital Raising to support Growth Initiatives:

Last month on 12 June 2020, the company announced the completion of the A$91.9 million placement which received significant interest from the existing as well as the institutional shareholders. Each share was issued at A$2.95.

On 19 June 2020, AQZ announced the opening of the SPP to raise to A$30 million. Eligible stockholders can apply for A$30k of new fully paid ordinary shares in Alliance.

The proceeds from the capital raising would position the company to invest in the growth initiatives and also strengthen the balance sheet. The company expects this to be primarily in the form of acquisition of further aircraft.

Qube Holdings Limited (ASX:QUB)

Qube is the largest integrated provider of import & export logistics service in Australia. It operates in more than 130 sites across Australia, New Zealand, and South-East Asia. Its business unit comprises of:

• Ports, Bulk and Logistics division,
• Infrastructure and Property division
• Strategic Assets division

Commitment from Woolworths to new Regional and National Distribution Centres:

On 23 June 2020, Qube declared that it signed two contracts for Lease and two Development Management Agreements with the Woolworths Group to develop new major warehousing throughout 26 hectares at Moorebank Logistics Park.

Both leases, comprising a 40,700 m² national and a 34,600 m² regional distribution centre are on first 20-year terms with available 6 x 5 year option.

Depending on NSW Government planning approvals, the national distribution centre would start operating from 2023 with regional distribution centre opening in 2024.

Under the two Development Management deals, Woolworths Group Limited (ASX:WOW) is developing the warehouses, and Qube is financing their construction. QUB’s capital commitment for the base building construction is projected to range from A$420 million to A$460 million.

Conclusion:

With the ease in government restriction, many businesses started taking initiatives to re-start their operations and business growth. The transportation and logistics were amongst those sectors that were impacted adversely during the crisis.

However, the so called second wave of Covid- 19 with rising new cases in NSW and Victoria is a big concern for the country and market as a whole. Thus, the future still seems to be quite bleak for economy regaining its momentum any soon.