Time to restock on QAF

SINGAPORE (Aug 17): OCBC Investment Research has maintained its “buy” recommendation for QAF, with a higher fair value of $1.33 from $1.27 previously, on the back of the group’s declared interim dividend, its stock outperformance against the Straits Times Index, favourable outlook for feed prices, and continued capacity expansion plans.

OCBC analyst Jodie Foo points out that that QAF had recently renewed the licensing agreement granting Gardenia Bakeries KL (GBKL) the use of the “Gardenia” trademarks on bread and other bakery products manufactured in Malaysia for five more years, ending March 2021.

Although the licensing fee was cut from 5.25% to 1.5% of gross sales of each approved bakery owned and operated by GBKL, Foo is not too concerned by the new development. “While QAF gets a lower licensing fee, this would be partially offset by a higher share of contribution from JV,” says Foo. “This quarter, we saw $1.81 million of share of profits from JV.”

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