QAF

[shanrui_91]

a very interesting company indeed. I have earlier dismissed it due to what I see from its track record, but a closer look and I realise that it has a lot of potential should they dump away all other businesses. I will certainly go in if they were to liquidate all other businesses even if it is below cost.

bakery produces an impressive 20+% Return on ASSET, which is very impressive given that it is not in the service industry. Production business is the greatest value destroyer, producing 10m accounting profit on 280m of asset which is only 3.5% return though its actual cash return is nearly 0. They will be much better investing in perp...

A potential cerebos
(not vested yet)

[shanrui_91]

I go to Ben Foods, their staff shop, every fortnight at Jurong Pier Road. Reasonably priced and fresh products. Their fresh meats are very popular. Their brands- Gardenia, Bonjour, Farmland, Cowhead, etc. not bad. Ben foods is a distributor of FMCG's as well. They are one of the biggest exporters of pork in Australia. They have lots of assets in farming in Australia. Turned around only in the past 2 years or so. Got rid, I think of their loss-making China juice making company 2 years ago, which greatly helped. Can read more about them here: http://www.qaf.com.sg/launch.asp

do you know if there's any concrete plan of divesting their farming operation in Australia and when are they going to do that? Or perhaps they should just spin off their bakery business instead.

The bakery business is a more profitable business than even our prized essence of chicken and tiger beer. In fact, bakery has been the cash cow that has been feeding all other lousy businesses. Bread and rice are the crown jewel in the FMCG market for a very simple reason that these are perishable that has very high turnover. Cowhead and farmland are just sub-par brands that act as a source of diversification perhaps.

This is the classic example of diworsification, but of course it shows that if you have an excellent business, it's really hard for a fool to destroy the company completely.

[VestedInterest]

I go to Ben Foods, their staff shop, every fortnight at Jurong Pier Road. Reasonably priced and fresh products. Their fresh meats are very popular. Their brands- Gardenia, Bonjour, Farmland, Cowhead, etc. not bad. Ben foods is a distributor of FMCG's as well. They are one of the biggest exporters of pork in Australia. They have lots of assets in farming in Australia. Turned around only in the past 2 years or so. Got rid, I think of their loss-making China juice making company 2 years ago, which greatly helped. Can read more about them here: http://www.qaf.com.sg/launch.asp

do you know if there's any concrete plan of divesting their farming operation in Australia and when are they going to do that? Or perhaps they should just spin off their bakery business instead.

The bakery business is a more profitable business than even our prized essence of chicken and tiger beer. In fact, bakery has been the cash cow that has been feeding all other lousy businesses. Bread and rice are the crown jewel in the FMCG market for a very simple reason that these are perishable that has very high turnover. Cowhead and farmland are just sub-par brands that act as a source of diversification perhaps.

This is the classic example of diworsification, but of course it shows that if you have an excellent business, it's really hard for a fool to destroy the company completely.

Not quite diworsification. It is still within the consumer staple business. A classic example of diworsification would be Aztech when they went into the marine business.

[shanrui_91]

I go to Ben Foods, their staff shop, every fortnight at Jurong Pier Road. Reasonably priced and fresh products. Their fresh meats are very popular. Their brands- Gardenia, Bonjour, Farmland, Cowhead, etc. not bad. Ben foods is a distributor of FMCG's as well. They are one of the biggest exporters of pork in Australia. They have lots of assets in farming in Australia. Turned around only in the past 2 years or so. Got rid, I think of their loss-making China juice making company 2 years ago, which greatly helped. Can read more about them here: http://www.qaf.com.sg/launch.asp

do you know if there's any concrete plan of divesting their farming operation in Australia and when are they going to do that? Or perhaps they should just spin off their bakery business instead.

The bakery business is a more profitable business than even our prized essence of chicken and tiger beer. In fact, bakery has been the cash cow that has been feeding all other lousy businesses. Bread and rice are the crown jewel in the FMCG market for a very simple reason that these are perishable that has very high turnover. Cowhead and farmland are just sub-par brands that act as a source of diversification perhaps.

This is the classic example of diworsification, but of course it shows that if you have an excellent business, it's really hard for a fool to destroy the company completely.

Not quite diworsification. It is still within the consumer staple business. A classic example of diworsification would be Aztech when they went into the marine business.

my diworsification is talking about the farm and the juice business. I don;t see any synergy in terms of revenue and cost as compared to bakery business. With the high return that the bakery can generate, the company should focus on expanding it beyond its existing scope of operation in Singapore, Malaysia and Phillipine instead of going into another business

[hkl]

I go to Ben Foods, their staff shop, every fortnight at Jurong Pier Road. Reasonably priced and fresh products. Their fresh meats are very popular. Their brands- Gardenia, Bonjour, Farmland, Cowhead, etc. not bad. Ben foods is a distributor of FMCG's as well. They are one of the biggest exporters of pork in Australia. They have lots of assets in farming in Australia. Turned around only in the past 2 years or so. Got rid, I think of their loss-making China juice making company 2 years ago, which greatly helped. Can read more about them here: http://www.qaf.com.sg/launch.asp

do you know if there's any concrete plan of divesting their farming operation in Australia and when are they going to do that? Or perhaps they should just spin off their bakery business instead.

The bakery business is a more profitable business than even our prized essence of chicken and tiger beer. In fact, bakery has been the cash cow that has been feeding all other lousy businesses. Bread and rice are the crown jewel in the FMCG market for a very simple reason that these are perishable that has very high turnover. Cowhead and farmland are just sub-par brands that act as a source of diversification perhaps.

This is the classic example of diworsification, but of course it shows that if you have an excellent business, it's really hard for a fool to destroy the company completely.

Not quite diworsification. It is still within the consumer staple business. A classic example of diworsification would be Aztech when they went into the marine business.

my diworsification is talking about the farm and the juice business. I don;t see any synergy in terms of revenue and cost as compared to bakery business. With the high return that the bakery can generate, the company should focus on expanding it beyond its existing scope of operation in Singapore, Malaysia and Phillipine instead of going into another business

The bakery business has already doubled in revenue and almost tripled its profits since 2002. I would think that management has been trying to grow this as fast as they can but the pace of growth is capped.

As for the acquisitions, as a business owner i would be looking for additional sources of income to complement my business. While I don't blame the management for the logic of the acquisitions, their track record has been quite poor (except for Bonjour).

Going forward I won't be surprised if they announce another acquisition, simply because the cash flow from bakery is so high. It doesnt take a genius to run the bakery business and the entire production process is fully automated (see on youtube).

[shanrui_91]

The bakery business has already doubled in revenue and almost tripled its profits since 2002. I would think that management has been trying to grow this as fast as they can but the pace of growth is capped.

As for the acquisitions, as a business owner i would be looking for additional sources of income to complement my business. While I don't blame the management for the logic of the acquisitions, their track record has been quite poor (except for Bonjour).

Going forward I won't be surprised if they announce another acquisition, simply because the cash flow from bakery is so high. It doesnt take a genius to run the bakery business and the entire production process is fully automated (see on youtube).

If there's a limit to the growth, then excess capital can be deployed through dividend or buyback.

As a business owner, I will definitely want to grow my income but not at the expense of value destruction. If i were to spend $100 today in buying an asset but i will only be getting a total sum of $50 from all present and future income as a result , then i am losing $50 though my reported accounting income will rise.

This is what Warren Buffet said:

"The primary test of managerial economic performance is achievement of a high earnings rate on equity capital employed (without undue leverage, accounting gimmickry, etc.) and not the achievement of consistent gains in earnings per share."

The difference between economic profit and accounting profit is something that I have just learnt in the past few weeks but which I felt is really important if you are looking at a business for its long-term return. Accounting is merely a way to present the financial state of the company, but at the end of the day, economic return and cash are still what that really counts for a company.

[freedom]

the primary production business was not bad in 2009, it brought in almost 34 million operating income. Of course, for other years, it is either not good or very bad. I believe the meat business is not as good and easy business as the bakery, but it is not that bad either. It just takes more to manage it well probably.

[shanrui_91]

the primary production business was not bad in 2009, it brought in almost 34 million operating income. Of course, for other years, it is either not good or very bad. I believe the meat business is not as good and easy business as the bakery, but it is not that bad either. It just takes more to manage it well probably.

I still don't think that it is the type of business they should get themselves into. The main reason why it was so bad after 2009 was that there's a massive influx of cheaper import, which means that it is subjected to price competition easily.

Anyway, I just realise that of the SGD 65m in profit reported this year, 20m comes from investment written off that has been recovered with the sale of the juice business. So its PE is certainly not cheap for now, unless they sell away their production business. Should not be hard considering that it account for 20% of the total market share.

The last thing that i don't like to see is their biological asset. Imagine a swine flu attack and they have to do a huge write-down though that might end up being a perfect time to enter the stock if it really happens.

[freedom]

the primary production business was not bad in 2009, it brought in almost 34 million operating income. Of course, for other years, it is either not good or very bad. I believe the meat business is not as good and easy business as the bakery, but it is not that bad either. It just takes more to manage it well probably.

I still don't think that it is the type of business they should get themselves into. The main reason why it was so bad after 2009 was that there's a massive influx of cheaper import, which means that it is subjected to price competition easily.

Anyway, I just realise that of the SGD 65m in profit reported this year, 20m comes from investment written off that has been recovered with the sale of the juice business. So its PE is certainly not cheap for now, unless they sell away their production business. Should not be hard considering that it account for 20% of the total market share.

The last thing that i don't like to see is their biological asset. Imagine a swine flu attack and they have to do a huge write-down though that might end up being a perfect time to enter the stock if it really happens.

I believe that the bakery business subjects to the same risk as highlighted. To think about it, what's really good about QAF's bakery business is probably its brand image. I think the way the management trying to turn around its primary production business is the right path: to build a good brand and have more value-added product, to differentiate it from low-margin commodity kind of business. It won't be easy and it will take time.

[shanrui_91]

the primary production business was not bad in 2009, it brought in almost 34 million operating income. Of course, for other years, it is either not good or very bad. I believe the meat business is not as good and easy business as the bakery, but it is not that bad either. It just takes more to manage it well probably.

I still don't think that it is the type of business they should get themselves into. The main reason why it was so bad after 2009 was that there's a massive influx of cheaper import, which means that it is subjected to price competition easily.

Anyway, I just realise that of the SGD 65m in profit reported this year, 20m comes from investment written off that has been recovered with the sale of the juice business. So its PE is certainly not cheap for now, unless they sell away their production business. Should not be hard considering that it account for 20% of the total market share.

The last thing that i don't like to see is their biological asset. Imagine a swine flu attack and they have to do a huge write-down though that might end up being a perfect time to enter the stock if it really happens.

I believe that the bakery business subjects to the same risk as highlighted. To think about it, what's really good about QAF's bakery business is probably its brand image. I think the way the management trying to turn around its primary production business is the right path: to build a good brand and have more value-added product, to differentiate it from low-margin commodity kind of business. It won't be easy and it will take time.

bakery is a good business because 3 conditions are achieved:

1) bread has extremely high turnover with an expiry date even if you cannot finish it. This is why it is one of the most profitable business with its turnover matched by maybe only rice, chocolate and cigarettes.
2)A relatively healthy margin of 10-12% is achieved by QAF though it is subjected to flour, diesel and oil price spike.
3) Gardenia manage to secure a very strong market share in it with its branding. In fact, it is much stronger in philippine and malaysia than in singapore, though it still holds a very significant market share locally with the help of bonjour.

As for production, somehow i just link it to Oceanus because of the biological asset i see in the balance sheet. Production of livestock takes time and the longer it takes the more risky it will be. it is more dangerous than your normal inventory.