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Understanding QAF Limited from an Investor’s Perspective

If you have bought milk, bread or processed/packaged foods from supermarkets, you probably would have purchased, or at least considered, QAF Limited’s (SGX: Q01) products before.

QAF is involved in bakery operations, pork production, food processing and distribution, feed milling, food trading and distribution, food manufacturing, and wine distribution. In addition, the company also owns warehouses which it leases out.

Some of the more prominent brands the company has in its portfolio are Gardenia, Cowhead and Farmland. In particular, Gardenia has received the “Super brands” title on a few occasions over the past decade.  A whole list of the brands the company has in its portfolio can be found here.

Let’s take a look at QAF’s financials to understand how it is doing. For this we will be using four metrics, namely the price to earnings (P/E) ratio, price to book (P/B) ratio, gearing ratio, and dividend yield.

The company has a trailing twelve months (TTM) earnings per share of S$0.0912 and a share price of S$1.08 currently. This implies a P/E ratio of 11.84, which is just a tad higher than the P/E ratio of the SPDR STI ETF (SGX: ES3) – an exchange-traded fund tracking the Straits Times Index (SGX: ^STI) – which stands at 11.54.

As at the end of the third-quarter of 2015, QAF has a net asset value of S$0.722. This would mean that the company has a P/B ratio of 1.50. Basically, this means that you are paying S$1.50 for something that is worth S$1.

The company’s balance sheet also ended the third-quarter of 2015 with S$69.2 million in short and long-term debt, and total assets standing at S$658.2 million. This results in a gearing of only 10.5% for QAF.

It should be noted that in its financial statements, QAF mentioned that it had paid off S$44 million in debt and took on new debt of only S$25.2 million. This shows that the company is generating sufficient cash flow from its business to pay off its obligations. This can also be found in its cash flow statement which showed that the company generated net cash of S$30 million from operations for the third-quarter of 2015.

Lastly, QAF has been fairly consistent in paying out dividends. Over the last four years the company has paid a yearly dividend of S$0.05 per share. This implies a dividend yield of 4.6%.

Looking at the four metrics above, it seems like QAF has a rather stable business.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Esjay does not own shares in any company mentioned.