Australia's least popular brands

Does a low rating mean you should dump these stocks?

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

At the end of 2012, Australia's biggest consumer review website, Product Review, revealed the least popular Australian brands according to reviewers. Although the popularity of a brand does not necessarily determine how profitable it is, brand unpopularity can indicate that the "intangibles" section of a company's balance sheet might need to be written down. I eagerly anticipate the 2013 results.

The worst services brand in 2012, according to Product Review, was Star Track Express. Star Track Express is a road freight company that, for most of 2012, was owned by Australia Post and Qantas (ASX: QAN). Qantas had bought the company in 2003 for $375 million, with a view to profiting from the explosion in package delivery ignited by the growth in Internet retail.

Qantas sold its stake to Australia Post in October 2012 for a profit of about $30 million. Qantas may have done well to divest itself of a declining brand, since the increased demand for parcel deliveries is sure to incite competition in the long term. However, growing demand means Star Track profits may continue to flow.

Perhaps the best example of a weak brand making profits for its owner is Dodo. The ISP was the bottom-rated ISP in 2012 according to site. Dodo was recently purchased by the fast-growing telecommunications company, M2 Telecommunications (ASX: MTU) for $157 million in cash and 10.4 million in shares. M2's shares currently trade for above $6.10, so the total consideration was over $210 million, using today's prices.

M2 is a solid business, and although it is straddled with more debt than I think is ideal, the company is likely to grow strongly in the coming years. It may not be much of a worry that Dodo has a poor reputation, because it remains one of the cheapest ISPs. It's also worth noting that Canstar Blue currently awards Dodo three stars for "Overall satisfaction," for its bundled plan, below iPrimus (also owned by M2), but on equal footing with Telstra and Vodafone.

Finally, the second-bottom-rated brand in the services category in 2012 was Origin Energy (ASX: ORG). It appears that Origin continues to damage its reputation as a retailer. A recent report on "sneaky power price tactics" in the Courier Mail quoted an Origin spokeswoman as admitting, "we need to do a better job of reminding customers when their discount period is coming to an end." The Daily Advertiser also reported on customer dissatisfaction just two days ago, after residents wrote to the paper regarding their "Origin Energy utility woes."

Foolish takeaway

Customer dissatisfaction does not necessarily destroy the investment thesis for either Origin Energy or M2 Telecommunications. However, sustained brand damage combined with weaker sales is an early indication that the company may eventually write down the value of a brand. It can pay for investors to monitor the brands owned by their companies. Just as an acquired brand can be overvalued on the balance sheet, a popular brand can often be far more valuable than a company's accounts would suggest.

Motley Fool contributor Claude Walker does not own shares in any of the companies mentioned in this article.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »