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QAF Limited Makes Money In 3 Different Ways: How Profitable Are They?

QAF Limited (SGX: Q01) is a food production company with three main business segments. The company may be on the radar of some dividend investors given the simple fact that its annual dividend has been maintained at S$0.05 per share from 2011 to 2015.

In an earlier article, I had taken a closer look at each of the three segments, which are namely, Bakery, Primary Production, and Trading and Logistics. I thought it would be interesting to follow up by looking at how profitable each business segment is.

More specifically, I want to understand how well each segment is doing when it comes to making a profit on each dollar of QAF’s equity that they employ. In other words, I want to calculate the return on equity for each segment. (The return on equity is found by dividing each segment’s profit by its net assets, or equity.)

QAF segment ROE table
Source: QAF 2015 annual report

It’s obvious that the most profitable segment within QAF – Bakery – is also the largest profit contributor.

As compared to the Primary Production segment, Bakery requires less capital investment. For example, there is no need to invest in working capital for the raising of livestock. Moreover, the Bakery segment has more liabilities, thus improving its return on equity through the use of leverage.

By analysing the profitability of QAF’s different segments, investors can get a handle on which areas of the company’s business can be improved upon.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.