QAF’s 1Q17 results came in within our expectations. Revenue was down 15% YoY to S$212.7m while PATMI was down 13% to S$14.2m, forming 26% and 21% of full year estimates. The decline was mainly due to deconsolidation of Gardenia Bakeries KL from Apr-16 onwards, and higher tax expense for Rivalea (Primary Production).

Notwithstanding the deconsolidation, the group saw an increase in underlying sales across all segments. Bakery segment launched new products and increased its market penetration, while Rivalea sales grew through higher volume.

However, there were some one-off write-offs and cost provisions made for Bakery, while Rivalea maintained its level of productivity. We maintain our HOLD and fair value estimate of S$1.46.

Source: OCBC Research - 11 May 2017