Will $QAF(Q01) rise again?

Will $QAF(Q01) rise again?

Brief background

QAF Limited (SGX: Q01) is a leading multi-industry food company with operations primarily in Singapore, Malaysia, the Philippines and Australia. It’s core businesses include
1. Bakery
2. Primary production
3. Food manufacturing
4. Trading and logistics
5. Investments.

It owns household brands such as Gardenia and Bonjour under its bakery business segments and Cowhead and Farmland under its trading and logistics business segments.

Recent events and news

April 26, ‘The Good And The Bad: What Investors Should Know About QAF Limited’s Latest 2016 Results’, refer to the news at: https://www.fool.sg/2017/04/06/the-good-an…

April 5, QAF’s annual report of financial year 2016, refer to the report at: http://www.qaf.com.sg/media/SGXAnnual%20Re…

April 1, ‘QAF Limited Makes Money In 3 Different Ways: How Profitable Are They?’, refer to the news at https://www.fool.sg/2017/01/13/qaf-limited…

February 24, ‘QAF’s FY2016 profit more than doubles to S$120.4m’, refer to the news at http://www.businesstimes.com.sg/companies-…

January 10, ‘QAF to invest S$21.5m to expand in the Philippines, refer to the news at

Performance summary

Overall, QAF has shown resilience in the financial year of 2016, amidst a challenging economic environment. ROE remains at a healthy 13% and PBT excluding exceptional items increased by 4%. Moreover, QAF maintained a healthy balance sheet and continued to pay steady dividends to its shareholders. It is interesting to note that QAF have plans to penetrate the halal food market by establishing new production plants in Malaysia that will export packaged bread to Islamic countries in Asia. Also, the factory currently undergoing construction in Malaysia will eventually replace the factory in Singapore when the latter lease expires and this will drive production costs down significantly. The stock price of QAF is currently on a downtrend.

Financial highlights

Operating performance

QAF’s revenue fell by 11% yoy, partially due to the deconsolidation of its Malaysia-based subsidiary, GBKL (Gardenia Bakeries (KL) Sdn Bhd), resulting in a fall in royalty fees collected. After adjusting for that one-off event, QAF saw top line growth with higher EBIT across all its business segments. Excluding the profits gained from the deconsolidation of GBKL, QAF’s diluted EPS in 2016 would still have increased by 16% from 2015 and a substantial increase in net income margins from $5.3 million to $13.5 million.

Financial & cash position

QAF reported a slight increase in assets despite the deconsolidation of GBKL as it entered into a joint venture for its Malaysian operations. QAF’s net cash flows decreased to -$4.149 millon despite an increase in operating cash flows by $15.067 million due to a large decrease in financing cash flow to -$39.884 million. Correspondingly, they reported lower cash and cash equivalent in the balance sheet.

Segment performance
Traditionally, the bakery segment provides the lion share of the revenue. However, after the deconsolidation of GBKL, revenue from the primary production segment has overtaken the bakery segment for the first time in 2016. QAF’s revenue was derived mainly from Australia, accounting for close to half of the total revenue, while its operations in Singapore and Philippines contributed similar but smaller amounts. Due to the deconsolidation of GBKL, the contributions from its Malaysia operations dropped sharply.




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