QAF

QAF: CIMB notes QAF’s key bakery unit, Gardenia, helms the mass-branded bread markets in Spore, Msia and the Philippines. Says strong branding, extensive distribution network and strong pricing power have created an economic moat around the bakery operations. Gardenia is now targeting corporate sales to hotels, fast food chain, restaurants and airlines, and is seeing initial success. Meanwhile, QAF’s pork pdtn business, Rivalea, has been refocused and found initial success in its new higher margin pdts. Mgt is open to strategic partnership to develop its pork pdtn business in Australia and does not rule out a sale “at the right price”. Otherwise, improving profitability could also revive Rivalea’s listing plans, following a recent failed listing on Catalist. CIMB has an unrated call on QAF. Nevertheless, the house sees QAF as a strong defensive in current volatile markets, with attractive 7.2% div yield. Notes QAF is trading at 3.4x EV/EBITDA, below regional peers’ 10.4x avg, which is unjustified. Tips catalyst if QAF divests its pork business, to free up capital into its bakeries for regional expansion.