QAF Limited - OCBC Investment 2015-11-17: Results within expectations

QAF Limited - OCBC Investment 2015-11-16: Results within expectations QAF LTD Q01.SI 

QAF Limited: Results within expectations 

 Revenue and expenses see some FX translation effects 
 Underlying sales grew 
 Core businesses’ profitability improves 


3Q15 PATMI up 30% YoY 

  • QAF Limited’s (QAF) 3Q15 results came in within our expectations. 
  • Revenue was down 5% YoY to S$243.2m due to FX translation effects, while PATMI rose 30% to S$10.5m. These formed 23% and 21% of our full year estimates for revenue and PATMI, respectively. 
  • On a 9M basis, revenue and PATMI formed 71-73% of our full year estimates. These translation effects are a result of the group’s operations in Australia and Malaysia, whereby the SGD has been stronger vs. AUD and MYR. 
  • Without the translation effect, Bakery and Primary Production business segments continued to see growth in sales, underpinned by the launch of new products and higher ASP. 
  • For the trading and logistics business segment (estimated contribution of about 9% of total sales), revenue was marginally lower on a smaller volume of trading activities, while profit was higher due to exports of better margin products. 

Operating margin improved 

  • Operating expenses also decreased, especially for the group’s Australian pork producer, Rivalea as well as the Malaysian Bakery operations which were helped by the translation effect. 
  • Notably, better product mix and efficiencies helped increase profitability for the group’s Bakery operations in Singapore, Malaysia, Philippines and Australia as well as its pork production side. 
  • Overall operating margins improved from 4.4% in 3Q14 to 5.8% this quarter. 

Consumption data for core markets still positive 

  • Recall that the group had earlier announced plans to invest in construction of a new plant to meet market demand in the Philippines, with an estimated investment cost of PHP836.2 (~S$25.0m). 
  • Staples form a major component of total household spending and this trend should remain through to 2019, according to BMI Research. 
  • Amid broader economic concerns for the group’s core markets such as Malaysia and Australia, underlying sales managed to continue growing. 
  • Looking ahead, management expects “satisfactory” profitability for the year. 
  • Following minor adjustments to our top-line expectations, we keep our BUY rating with fair value estimate of S$1.27. 


Jodie Foo OCBC Securities | http://www.ocbcresearch.com/ 2015-11-17
OCBC Securities SGX Stock Analyst Report BUY Maintain BUY 1.27 Same 1.27


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