QAF

QAF: CIMB’s Idea of the day. House note that:

1) Re-rating to its historical 2x P/B translates into a fair value of $1.24.

2) Is there a case for re-rating? Yes.
a) appears to have purged its loss-making China operations,
b) can easily enhance value by ploughing into its vastly successful bakery business capital freed up by jettisoning non-core assets.
C) downside risk limited by below-peer valuations.

3) And if re-rating doesn’t happen. Think of it as you having sold QAF a call option to privatise the Co with the generous dividends you receive as the option premium. No need to tap the equity market and a trend of major shareholder purchases sets the stage for tongues to wag on possible privatisation to unlock value for shareholders.