QAF

[Mushy]

Sharing this webinar that had been posted on youtube yesterday. The first 30 minutes is the presentation. Rest are Q&A.

[mkzhou88]

will this year profit better than last year?

most likely

https://links.sgx.com/FileOpen/QAF_Profi...eID=596841

you are right! lucky i bought more earlier. likely price go up after 2019 financial announcement

[Squirrel]

will this year profit better than last year?

most likely

https://links.sgx.com/FileOpen/QAF_Profi...eID=596841

you are right! lucky i bought more earlier. likely price go up after 2019 financial announcement

Congrats to fellow valuebuddies holding the position! Looks like I am grossly wrong about feed prices eroding the margins.

What do you think is the difference between PAT and underlying earnings? Is there some kind of inventory revaluation that is included in PAT?

[Squirrel]

will this year profit better than last year?

most likely

https://links.sgx.com/FileOpen/QAF_Profi...eID=596841

you are right! lucky i bought more earlier. likely price go up after 2019 financial announcement

Congrats to fellow valuebuddies holding the position! Looks like I am grossly wrong about feed prices eroding the margins.

What do you think is the difference between PAT and underlying earnings? Is there some kind of inventory revaluation that is included in PAT?

I think I have found what it means from 4Q 2018 report.

"Group PBT decreased by 67% from $40.6 million for FY 2017 to $13.3 million for FY 2018. The decline was mainly attributable to Rivalea and, to a smaller extent, losses of $4.2 million in connection with the ammonia leak in the Group’s warehouse at Fishery Port Road, upgrading of older bakery and Singapore warehouse facilities, and foreign currency translation loss of $4.1 million recorded in FY 2018. Excluding the reversal of provision for cessation costs $1.3 million no longer required for Gardenia Food (Fujian) (“Gardenia Fujian”), foreign currency translation loss of $4.1 million, losses of $4.2 million in connection with the ammonia leak and the upgrading of older bakery and Singapore warehouse facilities and fair value loss on biological assets of $1.7 million, underlying earnings would be $22.5 million representing a 56% year-on-year decline from FY 2017 of $51.0 million."

So basically there are some one time gains (probably fair value gain on biological assets?) underlying the PBT and PAT. Interesting way to guide the financials. Still a good outcome though.

Cheers!

[grandslam]

will this year profit better than last year?

most likely

https://links.sgx.com/FileOpen/QAF_Profi...eID=596841

you are right! lucky i bought more earlier. likely price go up after 2019 financial announcement

Congrats to fellow valuebuddies holding the position! Looks like I am grossly wrong about feed prices eroding the margins.

What do you think is the difference between PAT and underlying earnings? Is there some kind of inventory revaluation that is included in PAT?

Yes, high feed eroding the margin. But I think the pork price rised faster, taking into consideration the grain to net pork weight conversion ratio of 3.6. Anyway feed has been on the high side since 2018, the variable would be more on pork price.

[Mushy]

I feel positive that the mgmt give a profit guidance before the actual result release as well as explain some details (hopefully more in the final results or AR). Some companies don't give guidance when they suddenly release outlier results. I immediately thought of Tiong woon 3 months ago.

The past quarter result was mainly impacted by primary production business.
Most of the time, I was tracking the prices of Aus pork on the ABARES website, which is the Aus govt dept for agriculture. This is updated weekly at exactly Thur 130pm sg time. 
They actually took the prices from APL (the Aus pork industry body) so there is typically a 1 week lag.
Both websites also give weekly forecast of grains situation.

With the historical prices and the number of pigs from QAF AR, it is possible to do a first cut estimate on the gains in their biological assets. I previously estimated +10%. But I wasn't sure if such gains will flow down into the profit statement.

Good time to update the positive factors of the pri production business since they are trying to sell it. No news so far. probably too small a business for the news to make any hoo ha of it. Make hay while the sun shines. The current up cycle is untypical as it was turbo boosted by the ASF which impacted Aus pork imports and hence boosted their own production prices. Most commentary over the past 2 years had been that the global effects would be felt for at least a few years before china can regain back their pig population (made worse by the covid19) so I think we have some time to enjoy the sun.

According to the guidance, FY2019 earnings per share is 4.9c or 4.1c (underlying). Nothing great if you compare to the better performances in recent years. Hopefully this is the start of better yearly numbers at least for the next 3 years. Should be able to pay the remaining div of 4 cents. Capex also more or less done.
Keeping in mind that the malaysia bakery business GBKL (50% owned) has to be IPO or one of the 2 shareholder acquired by apr 2026 (ref 2018 AR).

[Squirrel]

I have made a decision and have taken up ownership of some QAF shares yesterday after the profit guidance. This seems like a really bad time to do so after the 10% surge but I have my reasons for it. I have always been interested in owning a piece of QAF and have been monitoring it all this while. Here are the reasons for why I am buying into the company.

1) The guidance indicates and reduced my worries of a cut in dividends. It seems like the increased cashflow should be more than enough to maintain the annual distribution.

2) The recent rainfall in Australia. If you look at the agricultural lands in Australia, which are located in NSW, QLD, Victoria and WA, the areas used for agricultural purposes are experiencing higher rainfall than usual in February itself. This as of now is not enough, but if the weather keeps up, it makes for a very favorable winter crop planting conditions compared to prior dry years. That depends on the rainfall from March to May period. Winter crops includes key ingredients to pig feed such as wheat, barley and lupins and other grains. However this is really really just very early signs that might not lead up to anything. The Root Zone Soil moisture looks very encouraging though. We shall see in September whether the harvest is bountiful. That's when the winter crop starts their harvest.

Map of Agricultural Land Use
https://www.agriculture.gov.au/sites/def...v1.0.0.pdf

Root Zone Moisture in Australia
http://www.bom.gov.au/water/landscape/#/...2020/2/20/

3) The profit guidance gives a boost to the sale of the primary production business. A conglomerate is worth less than the sum of parts, and with a higher likelihood of sale, that would really help in the company's share price.

So, as what I always like to do, I like to go into a company when I feel that the risk reward ratio is enticing. We might be looking at the start of a goldilocks period of high pork price and low feed price. If that's the case, the primary production business might fetch a handsome price. If not, I am still happily sitting on a stock with 6.1% dividend yield that is likely to be maintained (on ex div pricing).

[Mushy]

Hi Squirrel, I am positive your investment in QAF will give you the expected results you are seeking. I hope you and other fellow QAF shareholders will tolerate me as my posting is seldom about praising the investment of shares. But I am definitely on the same boat as all as QAF is 50% of my overall stock portfolio. If it sinks, I sink.

Lately we have been talking much on the pri production business of QAF. I would like to ask a question to all valuebuddies that I had been pondering on the bakery business of QAF. Does QAF limited owns the Gardenia brand 100%? We know QAF makes and sells Gardenia bread in the 3 main countries of Singapore, Philippines and West Malaysia (50% owned GBKL). Does it own the rights to the Gardenia brand in other countries like Indonesia, East Malaysia and other ASEAN countries? I thought it does until recently I read about a Malaysia listed company KTC taking over the Gardenia Bakeries in East malaysia from another Malaysian company Tong Hing. In addition, KTC will also take over the exclusive rights to use the gardenia brand in Indonesia from an entity call Gardenia International, and expand into the Indonesia market. All these for 10 years.

What do these developments means for QAF?
Is there any link between the East Malaysia Gardenia bakery and QAF (through GBKL)? Did Tong Hing (and now KTC) need to pay royalty?
Is gardenia International (whom held the rights to Gardenia brand in Indonesia) linked to gardenia International (S) Pte Ltd which is 100% owned by QAF limited (Ref 2018 AR)?
QAF did not make any announcement regarding these developments and I had not been able to find the answers in QAF documents and internet.

https://www.theborneopost.com/2020/01/23...-gardenia/

[cif5000]

will this year profit better than last year?

most likely

https://links.sgx.com/FileOpen/QAF_Profi...eID=596841

you are right! lucky i bought more earlier. likely price go up after 2019 financial announcement

The guidance estimated a Profit before Tax of $23.4m $23.9m in 4Q19. 

I also looked at the quarterly results from 2015 on and this number is the highest in the last 5 years (adjusted for exceptional items).

Will QAF revisit the market cap of $700-800m from the current $500m now that the Primary Production business has turned favorable?

[cyclone]

QAF released 4Q2019/FY2019 Financial Results : https://links.sgx.com/FileOpen/QAF%20Lim...eID=597893