• Underlying performance improved
• Sale of 20% stake in Gardenia KL
• Final DPS of 4 S-cents unchanged

FY15 PATMI up 17% YoY

QAF Limited’s FY15 results came in within our expectations. Revenue was down 2% to S$998.3m due to exchange rate translation effects, particularly SGDAUD and SGDMYR. PATMI rose 17% to S$52.5m. These formed 97% and 106% of our full year estimates for revenue and PATMI, respectively.

Excluding FX translation effects, all business segments (Bakery, Primary Production, Trading & Logistics) continued to see growth in sales, underpinned by the launch of new products, higher ASP and volume sold. Operating expenses declined, partially helped by the translation effects. All segments reported an improvement in operating profits, with Bakery and Primary Production segments enjoying increased efficiencies and economies of scale.

Sale of shares in Gardenia KL

The group has entered into a conditional sale and purchase agreement to sell a 20% stake in Gardenia KL for RM90m (~S$30m) to Pardiberas Nasional Berhad (BERNAS), who is a longstanding partner that currently owns a 30% stake.

The sale is for the purpose of complying with the Malaysian regulatory condition, whereby at least 70% of the total issued share capital of Gardenia KL must be owned by Malaysian citizens. Among certain conditions stated in the agreement, one condition is to seek approval for the equity condition to be revised to 50%, such that the proposed sale will eventually result in a 50:50 ownership between both parties. A net gain of ~S$8.4m after certain cost considerations is expected from this.

Continues expanding presence

We note that the bakery division has extended its presence in the Philippines as well as China. Bakers Maison, a division that makes Frenchstyle breads and pastries in Australia, has made its move into Philippines. But operations in Fujian, China have inevitably incurred some start-up costs and initial losses.

All considered, the group has maintained a final DPS of 4 Scents, bringing total DPS to 5 S-cents, unchanged from last year. Maintain BUY with fair value estimate of S$1.27 unchanged.

Source: OCBC Research - 26 Feb 2016