QAF Limited’s Latest Earnings: What Investors Should Know

QAF Limited (SGX:Q01) reported in its third-quarter earnings report last Friday. The reporting period was for 1 July 2016 to 30 September 2016.

The business of QAF can be divided into four major buckets, namely Bakery, Primary Production, Trading & Logistics and Investments & Others. It may be best known for the Gardenia bread which is a staple in Singapore grocery stores. Geographically, majority of its sales come from Singapore, Malaysia, Australia and the Philippines.

You can learn more about the company here .

Financial highlights

Here’s a rundown on the financial figures for QAF:

  1. For the reporting quarter, QAF recorded revenue of $212.4 million, a 13% decline from a year ago.
  2. Profit attributable to shareholders, though, was up 84% to $19.4 million. The improvement came on the back of lower operating expenses and the inclusion of share of profits of its joint venture.
  3. Earnings per share (EPS) saw a 79% increase from $0.019 cents in 2015’s third quarter to $0.034 cents in the reporting quarter.
  4. Cash flow from operations came in at $24.5 million with capital expenditure clocking in around $17.9 million. This puts the company in positive free cash flow territory to the tune of $6.6 million. This is a decline from the free cash flow of $8 million recorded a year ago.
  5. As of 30 September 2016, the group had $94.9 million in cash and equivalents and borrowings of about $83.5 million. This is a decrease from a year ago where the group had $109.1 million in cash and equivalents and borrowings of about $91.6 million.

In summary, QAF saw its topline fall, but recorded strong growth in profits anyway. QAF balance sheet was also slightly weaker but it recorded positive free cash flow, albeit lower than the year before.

Operational Highlights

In April 2016, QAF sold a 20% stake of Gardenia Bakeries (KL) Sdn Bhd (GBKL) to Padiberas Nasional Berhad for S$30 million. The sale was enacted to comply with regulations from Malaysia’s Ministry of Trade and Industry. The deconsolidation of GBKL’s revenue resulted in QAF’s sales declining 13% year on year. GBKL is now considered a joint venture.

Beyond that, QAF said its Bakery, Primary Production and Trading & Logistics segments all recorded increase in sales.

QAF included the following outlook in its earnings report:

“As announced by the Group previously on 26 April 2016, in compliance with FRS, the Group is required to determine the fair value of the Group’s remaining 50% stake in GBKL. The Group has engaged external valuers to support the determination of the fair value and an announcement will be made when the fair valuation is completed. In the event where the fair value is higher than the carrying value of the 50% stake in GBKL, the Group will recognise the excess as a gain in the income statement. Subsequently, the resultant carrying value of the joint venture will be subjected to a yearly impairment review including depreciation, if any.”

“Save for the effects as described above, the Group is expected to perform satisfactorily for the full financial year ending 31 December 2016, barring any unforeseen circumstances.”

Foolish take away

At its closing price last Friday of S$1.33, QAF sported at a trailing PE of 9.3 times and a dividend yield of 3.8%. 

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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 Chin Hui Leong doesn’t own shares in any companies mentioned.