Investment in QAF is larger now.

I have been a shareholder of QAF for donkey years and I remember the very first time I bought some of its stock was at about 60 cents a share.

Over the years, I enjoyed free Gardenia bread with the dividends I received.

The last time I blogged about QAF was in 3Q 2018 although the last time I commented about QAF was in February 2022.

For both the blog and comments, please see:

3Q 2018 passive income: QAF.

QAF was one of my largest investments by market value at one point although it was a rather small largest investment like my investment in Sabana REIT is today.

See:
Largest investments updated 2022.

So, when was QAF one of my largest investments by market value?

It was back in 2017 when it was trading at more than $1.40 a share.

As I believed QAF was worth much more, I added to my investment back then, averaging up. 

The highest price I paid was $1.42 a share.

Regular readers know I don't usually bother to calculate average prices of my positions since as an investor for income, my favorite holding period is forever and average prices aren't very meaningful to me.

As long as I feel that I have paid a fair price, it is good enough for me.

However, for this blog, I decided to calculate the average price because it would help to show how investing in bona fide income producing assets which pay meaningful dividends is less problematic even if we have paid a higher price.

My average price after averaging up was about $1.02 a share which meant that I have been nursing a paper loss since then although if I were to take into consideration the dividends received, not too bad.

The longer I stay invested, the safer it becomes.

Averaging up isn't always wrong but, of course, Mr. Market is always right.

So, through this lens, I was wrong to average up in this case.

Very cham liddat. (TmT)

Of course, regular readers know that during the COVID-19 induced bear market, I was adding to some of my investments as the dust started to settle.

Most of my war chest went to investing in the local banks and IREIT Global. 

Then, later on, after the dust settled, Sabana REIT.

I had a list of businesses I would have liked to significantly increase exposure to but I didn't have unlimited firepower although I did manage to nibble at some of them.

I had to prioritize those businesses which I thought were more interesting.

The purchases involving UOB, IREIT Global and Sabana REIT were all six figure sums and were relatively large by my standards.

Mostly exhausted after those purchases, my war chest needed time to recover.

With a bigger cash pile in 2022, I decided to add to my investment in Centurion Corporation towards the end of 1Q as its stock price languished.

Then, looking around more recently, I decided to add to my investment in QAF Limited.

Back in 2021, QAF was already trading at 90c to $1 a share.

Yes, I should have bought some in 1H 2020 but hindsight is, of course, perfect and mostly useless.

Anyway, with the price of its stock languishing, I decided to add to my investment quite recently.

QAF's latest numbers shows a much stronger balance sheet which I like.

Source: QAF Limited.

With a stronger balance sheet, QAF will not have to rely on debt too much to grow organically.

I continue to believe that QAF is a business that is recession proof and it could even benefit from an inflationary environment.

Inflation is, of course, a hot topic.

QAF had a difficult 2021 and with higher prices of wheat and energy likely to be persistent in 2022, it is easy to understand why Mr. Market is feeling somewhat pessimistic.

However, looking forward, QAF should eventually be able to pass on the increase in business costs to consumers as demand for its products should be relatively inelastic and demand could even strengthen during hard times.

Of course, I say "eventually" because if inflationary pressure should strengthen too much too quickly, things could get hairy in the shorter term.

Still, I doubt most people would stop buying their favorite loaf of quality bread just because the price has gone up by 20 or 30 cents or even a dollar.

In fact, I paid a higher price for my loaf of Gardenia low GI soft grain bread today.

Anyway, is QAF one of my largest investments now?

Even after recently adding to my investment, unless its share price goes back to $1.40 or so a share, QAF is still one of my larger smaller investments.

Of course, I could add more aggressively to my investment in QAF and make it one of my largest investments now.

However, with a war chest that is still recovering from big purchases in the last bear market, I think pacing myself is probably a good idea.

My war chest, after all, is not growing as quickly as it was able to when I was still gainfully employed so many years ago as much of my passive income is used to meet financial obligations in my retirement.

My bowling ball that sometimes cosplays as a crystal ball agrees.

Reference:
Largest investments in 2017.

3Q 2018 passive income (non-REITs): QAF.

In 3Q 2018, I also received questions from readers on QAF and they were similar to this comment from 9 August 2018:

Reader said...

at the current price weakness and offering a dividend yield of almost 6%, will u still considering nibbling??


AK said...

QAF is now trading at a discount to NAV and there is also some insider buying activity.

I would buy some if I weren't already invested and if I didn't have other investments that are tempting me to buy more as well. ;)







Revenue and earnings have been declining at QAF as they face rather challenging conditions.

They are spending more on advertising to defend their bakery business while their pork business in Australia continues to face oversupply pressure.

Having said this, QAF is rather conservative and has a pretty strong balance sheet.

Although I feel that QAF is still able to sustain a DPS of 4c or even 5c based on the strength of their balance sheet while waiting for improvement, I am prepared for a lower DPS which is probably a prudent thing to have.





Although tempted to add to my investment in QAF, with limited resources, I decided that other investment opportunities in many ways were more attractive in 3Q 2018.

For example, both from an earnings and relative dividend sustainability perspective, Centurion is more attractive.

Another example, from a discount to NAV and prospective dividend yield perspective, Accordia Golf Trust is much more attractive.

However, if Mr. Market is to become even more pessimistic about QAF, all else being equal, I might buy some.

Dislike QAF's CEO and investing in QAF.

Reader says...
What is your view with QAF now and what do you think about their management?

Heard some negative comments on their current management, especially about their CEO background.

AK says...
QAF is related to the Salim group in Indonesia. They have a tight grip on the business. Some don't like this kind of family controlled businesses.

I try to stay objective.






QAF did pretty well until the downturn in the pork business in Australia and that is a cyclical commodity business which means things should look up again eventually.

QAF does have a strong balance sheet and should be able to weather the downturn.





Having such a large majority stake in the business, it is in the interest of the insiders to make sure the business does well and continue to be the major beneficiary of a steady and meaningful dividend payout.





Many years ago, some people also told me horror stories about Old Chang Kee's CEO but it has turned out to be one of my best investments.

Most people are attracted to gossip and that is why tabloids do well.





We should only have to concern ourselves with whether the business is able to deliver what we expect from our investment.

Everything else is just a distraction.

Related post:
QAF's earnings downs but...

QAF's earnings down but cash increased. What is this?

Reader says...
Thanks for talking to yourself!

Really helpful in terms of long term planning for FI.

Just wanted to get some of your thoughts on QAF..






Latest results show much lower earnings (~60% less), and the stock price took a hit..

However, i see that their cash on hand has increased quite a lot.

With all the other news about it i.e. IPO not proceeding..

Could you talk to yourself on this?

AK says...
The weakness in earnings is probably cyclical (due to oversupply of pork in Australia).

So, I am waiting to buy more if Mr. Market should go into a depression.

You might want to read the related posts at the end of this blog.







Reader says...
How would you define a depression for them, and how would you conclude that their mgmt is taking the right steps? Thanks!

AK says...
If we accept that the weakness is cyclical and not structural, then, we understand that earnings will recover. 

It could take months or years but it will recover.


To be able to weather cyclical downturns, a company must have a strong balance sheet. 

This is what Marco Polo Marine has taught me. 

QAF has a strong balance sheet.





A company could become more valuable over the years but due to downturns which could be prolonged, its stock could trade at relatively low prices. 

That would be a good time to accumulate. 

This is what Wilmar has taught me.

QAF is more valuable today than it was a few years ago.

As for the management, I let their track record speak for them. 

Holding a relatively large controlling stake, they are driven to make QAF more and not less valuable.





Reader says...
I'm still young and willing to wait for recovery, just want to be certain of my decisions 🙂

1) Could i ask why you believe the downturn is cyclical?

Thanks for your time!

AK says...
The primary production business is a commodity business.

This is similar to Wilmar's businesses in agriculture.

This is a cyclical business.

I am referring to QAF's pork business in Australia, of course.

Related posts:
1. Plunging earnings at QAF.
2. Wondering about QAF.

QAF's 2Q17 profit after tax fell 72%.

Part of QAF's large decline in earnings should not come as a surprise since, one year ago, in 2Q 2016, QAF recorded an exceptional gain of $9.7 million from reducing its stake in Gardenia Malaysia (GBKL) to 50%. 

If we were to exclude that exceptional gain, however, profit after tax still reduced by 58%, year on year. Not as bad as 72% but still rather attention grabbing.

Singapore and Malaysia

QAF's share of profits in Malaysia is reduced because of its smaller stake in GBKL. However, the reduction is bigger this quarter compared to the last quarter.

It was revealed that QAF experienced issues in its Johor production plant. This affected sales volume not only in Malaysia but also in Singapore. 

Otherwise, QAF would probably have done better in both countries. There were also some one off cost items due to problems at the said plant.

Philippines

The bakery business in the Philippines is doing well but incurred higher marketing and distribution costs. It was revealed that although costs are heightened, the bakery business achieved higher sales and increased market penetration in the country. 

Looking at the Income Statement, Other Operating Expenses saw the biggest increase of 23% and it was revealed that most of this big increase is due to higher marketing costs in the Philippines. This is also a market in which QAF is planning to expand its footprint.

China

The bakery business in China is still losing money but losing less money. Narrowing losses is good news but if it continues to bleed, it might be a good idea to shut it down. QAF will decide by end of the year if it should continue its business in China.

Australia

QAF's pork business in Australia saw a 20% reduction in selling price due to an over supply situation which led to downward pricing pressure. 

The demand for pork is still healthy but the over supply will take time to resolve. It is hard to say how long the situation might persist but I doubt that it is enduring. 

The situation is probably more cyclical than structural.

One quarter does not make a year. It is reasonable to wait and see if QAF is able to recover earnings in the coming quarters as it pursues growth.

To be realistic, however, any recovery could take some time to materialize as new production plants are built. Also, it is my guess that many of the increases in costs and expenses are going to be sticky.

Having said this, note that QAF is meeting the challenges from a position of strength as its balance sheet remains strong. 

Cash and cash equivalents also increased year on year from $97 million to almost $126 million. 

QAF has a good track record and I like to think that the managerial competence is more enduring than the challenges being faced.

Even with reduced earnings in 2Q 2017, QAF is capable of maintaining a 5c DPS but it is harder to say if a reduction will happen or not. With this in mind, while waiting for improvement in performance, I look forward to being paid.

If Mr. Market were to send QAF's share price tumbling, it would be an opportunity for me to accumulate a larger position in a competently run and financially sound company which is likely to do better again in future.





If there should be a decline in share price, I hope it is a big one of, say, 10% or 20% and not just another dip.

See announcement: HERE.

Related post:
Wondering about QAF Limited.

Wondering about QAF Limited (Updated).

Pulled pork as Rivalea calls off IPO
The Australian, November 7, 2017
(See Comments section at the end of this blog.)

--------------------------------

7 October 2017

Reader:
Hi AK, thanks for the session (i.e. Evening with AK and friends). 

QAF has received shareholders approval to list it's primary production on the ASX. 

Since management has not indicated that the proceeds from listing will likely not translate to special dividend for shareholders, hopefully they can put the money to good use to expand their operations in the Philippines. 

Wonder when the share price will be appreciated by investors and truly appreciate upwards.




AK:
I dunno if the share price will move up or not. One off gains are one off. So, don't place too much emphasis on that. 

Although QAF has a good track record, we could see lower share price if the pork oversupply situation in Australia is prolonged and lasts for several quarters. Earnings will continue to suffer then.

Off the top of my head, in such a situation, we could see $1.00 - $1.10 a share then. 

As QAF should be able to maintain its dividend, I am staying invested and getting paid while waiting.



-------------------------
Reader #1:

I wonder if any of your readers have written to you recently about the longer term aspects of QAF- both in dividend yield and share price?

Reader #2:
Hi AK, I know you are an investor in QAF Limited. Any reason why the share price is plunging? I know a long time director just stepped down last year. Do you think that has an effect?

Singapore's Longest Sandwich

AK:
Don't ask me about share price. Ask Mr. Market. There is no way I can tell how prices might move now or in the future (with certainty). Past prices, I can tell you easily.

Dividend yield? That partly depends on share prices. Refer to what I said above. ;)

There will always be challenges in business. I will say that QAF's track record is a good one and I can only hope that they continue to bring home the bacon (and bread). ;p



Of course, QAF is not just about Gardenia bread although that is what most of us know them for. QAF is also in the business of pork production in Australia (i.e. Rivalea) which is doing very well. 

It was only a few years ago that Rivalea's viability was still a big question mark and some readers might remember that I blogged about it too. 

Now, Rivalea stands shoulder to shoulder with Gardenia in importance to QAF.

Of course, with the strategic review to improve value for shareholders still underway, it is difficult to say what will happen in future but it is reasonable to assume that any action taken will probably result in value being created.

The "worst" thing that could happen from the review is for QAF to maintain the status quo. To an investor for income, this is probably not really a bad thing but to a speculator, it could be.

Know our motivations as investors and know our investments. Then, we will know if the investments are appropriate for us.

If they are appropriate investments for me, I will stay invested. The day they are no longer able to do what I think they should do for me is when I would probably let them go. Time will tell.

Que sera sera.





Slides presentation on Rivalea:
HERE (published in June 2017) 

Related post:
How much is QAF worth?

Good entry price for QAF Limited (Part 2).

Source: Bloomberg.

Reader #1:
QAF price dropping. Any change in your opinion of QAF?

AK:
Any reason to change?

Reader #1:
probably not

DON'T MAKE THIS TERRIBLE MISTAKE.

Reader #2
QAF is getting lower, wondering you have done any change to your holding, raised up or reduced or still the same?

AK:
I am too lazy to make any changes but what you do should depend on what you believe in.

Related post:
Good entry price for QAF.

How much is QAF Limited worth using DCF?

Warren Buffett on Interest Rates & Valuations.

Many people ask me what is a fair price for QAF Limited. Obviously, all of us will have our own answer.

Of course, depending on Mr. Market's mood, share price could go higher or lower. There is no accounting for prices or so I have heard people say.

What we can try to find out is the intrinsic value to help us make sense of the price offered by Mr. Market. After all, price is what we pay and value is what we get.

I decided to play around with some numbers to see what QAF Limited's intrinsic value should be using Discounted Cash Flow (DCF), a process which is made much easier using an online calculator I found: 
http://www.moneychimp.com/articles/valuation/dcf.htm

I will try to be more conservative because I don't know all there is to know. Instead of entering earnings per share (EPS) as 10.9c, I will enter 10c.

In scenario 1, to be even more conservative, I assume zero growth in QAF Limited's earnings and a risk free rate of 3% which is a bit higher than what is offered by a 30 years bond issued by the Singapore Government now. The risk free rate is what I am going to use as the discount rate for DCF calculation.

Stock value per share: $3.33

In scenario 2, to be even more conservative, I assume a higher interest rate environment with a risk free rate of 5%. Again, I assume zero growth in QAF Limited's earnings.

Stock value per share: $2.00

In scenario 3, to be more realistic, I will assume some growth in earnings. After all, QAF Limited's EPS has grown over the last few years. I will use a risk free rate of 5% in this scenario for that conservative element.

Stock value per share: $2.50.

Now, is QAF Limited's fair value at least $2.00 a share? You blur? Don't look at me. I am only a blogger. What do I know?

Read more about DCF: HERE.

Related post:
What is QAF Limited really worth?

What is QAF Limited really worth?

Gardenia is providing the best that consumers deserve! Impressive!

QAF Limited has announced a 129% increase in full year net profit. 

A final dividend per share (DPS) of 4c has been declared. Total DPS for the year is 5c.

Why the big jump in net profit? There is an exceptional item which accounts for almost $60 million worth of income.

Earnings per share (EPS) for the full year 2016 is 21.4c. Excluding the exceptional item, EPS is 10.9c which is still a very decent 16% increase over 9.4c from the year before.

I have said before that QAF Limited should trade at a PE ratio of at least 14x. However, if what happened at Auric Pacific is any gauge, QAF Limited should trade at a higher PE ratio.

Shareholders of Auric Pacific (think Sunshine bread) received an offer price of $1.65 a share in early February. I said then that the offer valued Auric Pacific at about 18.3x PE ratio.

Based on Auric Pacific's full year results released a few days ago, a full year EPS of 5.74c means that the offer price of $1.65 valued Auric Pacific at 28.7x PE ratio! (See announcement: HERE.)

I have also found out that leading packaged bread bakeries in Thailand and the USA trade at 19x and 23x PE ratios, respectively. 

Based on all these comparisons, QAF Limited even at $1.55 a share is still inexpensive. At 18x PE ratio, it should trade at $1.96 a share.

Of course, I do not know if Mr. Market is willing to pay $1.96 a share for QAF Limited and, frankly, this is more of an academic exercise for me. After all, I am more interested in collecting dividends from well run businesses.

In January, QAF Limited announced plans to expand their operations in the Philippines, a market which is doing very well for them. All else remaining equal, they are likely to do even better once their expansion in the Philippines is completed in the next 2 years.

What is QAF Limited really worth? Don't ask me. I am just a blogger. What do I know?

See results: HERE.
Related post:
Good entry price for QAF Limited?

Good entry price for QAF Limited?

Reader:
"Hi, I found out abt ur blog thru Remove Sabana Mgr fb grp. Thks for sharing CNY video from Gardenia. I din know abt QAF. What is ur ave price? Do u think this $1.41 is gd to enter?"
AK:
"What is my average price for QAF Limited? Is $1.41 a good entry price? Alamak! I am not a guru and I just anyhow do valuation. You have been warned. Er, I anyhow talk to myself in my blog later."

OK, I start talking to myself now.

What is my average price? I don't know. I have never bothered to find out. I could but I just don't bother. AK is lazy. Regular readers know I don't care about average prices.

I do know I have been a QAF shareholder for many years and I first bought some shares at 60+ cents a share donkey years ago because I wanted to eat free bread. Mental? Must be.

Is $1.41 a good price to enter? I don't know about price but I probably can say something about value.

QAF 3Q 2016.

Q2 2016 EPS was 5.1c. 
Q1 2016 EPS was 2.9c.
(Hyperlinked. Click on above links to read quarterly announcements.)

So, for first 9 months of 2016, total EPS was 11.4c. 

To put things in perspective, full year 2015 EPS was 9.4c. 

So, buying more at $1.03 a share in 1H 2016 meant paying a PER of under 11x. Yes, that was the last time I bought more QAF shares.

Now, with only 9 months worth of earnings in 2016 (i.e. 11.4c a share), assuming Q4 does not turn in a loss and we have zero earnings in Q4, 11x PER would give me a price of $1.25 a share or so. 

If Q4 were to turn in pretty decent earnings which I think it would, of course, based on 11x PER, the price should be higher. If Q4 turns in an EPS of 3c, I would get a price of $1.58, for example.

Now, for a dash of excitement, if I remember correctly, when Mr. Market was feeling a bit happier in the past, QAF Limited was valued at about 14x PER which would give us a share price of almost $1.60 a share based on EPS of 11.4c (i.e. with no contribution in Q4). 

What if we were to add EPS from Q4? 3c EPS in Q4 maybe? That would give us $2.02 a share at 14x PER.

OK, I am beginning to talk nonsense. What? Will it happen? Alamak, don't ask me things about the future. I don't know.

I will say that getting in at $1.41 a share with the thought that share price is probably going higher in the next few weeks or months has a strong speculative flavour. There is nothing wrong with a bit of speculation, I always say, if sized properly.

Now, seriously, go read the quarterly reports for yourself and see why earnings went up as much as they did. Don't just eavesdrop. 

AK is mental. Remember?
-----------------------------
Added 7.55PM (31 Jan 17):

Bad AK! Bad AK! 
Related post:
Breadtalk, Old Chang Kee and QAF Limited.

Watch CNY video clip from Gardenia: HERE.

Breadtalk, Old Chang Kee and QAF Limited.

I avoided buying Breadtalk's stock for a long time, probably for as long as I avoided buying their bread and I definitely have never bought their "fresh" soya bean milk before. All so expensive.

Yes, I know. AK is very giamsiap. Terrible!





A very high PE ratio and gearing makes the stock unpalatable. 

To make it even less attractive, the dividend is peanuts. 

Give shareholders only enough money to buy some bread, maybe.

However, I revealed that I nibbled at Breadtalk on price weakness during the last "Evening with AK and friends". Why har?





Reader:
Sir, there is one thing that puzzled me. You mentioned that you bought Breadtalk, but this seems contrary to certain principles which you always talk about. 

For example, the stock doesn't seem cheap, seeing that the PE of 44 is near its 5-year high. 

Second, the stock doesn't give very high dividends (you already explained this point). 

It is the first point that puzzles me, since you have always talked about buying an asset when it is cheap. How come this time it is different leh?





Assi AK:
If cash flow from ops is strong and CAPEX reduces, earnings will improve.

BT has strong CF... CAPEX needs to come down and if/when it does, earnings will go up and PER will improve. 

They could pay better dividend then. 

Not for the pure income investor.

Tsk, tsk...

Not for the purist income investor, to be sure, it is a smallish long position for me.

Consistent with my philosophy (remember "the pyramid") and to put things in perspective, it accounts for less than 1% of my portfolio.

Related posts:
1. Old Chang Kee versus Breadtalk
(Why AK prefers OCK to Breadtalk?)
2. QAF Limited.
(If you like bread, QAF is yummier!)
3. Bought cheaper bread on BREXIT!
(AK bought more at $1.03 a share.)

Should I buy a higher price or lower price stock?

Thanks, AK.

I was considering between singtel and singpost but decided to go for singpost cause I can buy more lots.

 

Singtel price is 3x of singpost. I was comparing buying 10 lots each. Hence singpost appeals to me more.

 

Any comments?

 

Regards,
D

Hi D,

Price is what you pay and value is what you get.

A 10c stock could be costlier than a $1 stock. ;)

I blogged about why QAF was cheaper at a higher price before, for example.

Use related posts below as food for thought.

Best wishes,
AK

Related posts:
1. $1.14 a share cheaper than 94c a share?
2. 1H 2016 income from non-REITs. (Added QAF again.)

BREXIT and 1H 2016 income from non-REITs.

Were there any major development in the non-REIT space for me in 2Q 2016? 

Selling most of my investment in NeraTel probably qualifies. I sold about 90% of my investment in NeraTel. 

Being a relatively substantial part of my investment portfolio, the sale, as you might have guessed, bumped up the cash level in my portfolio by quite a bit.

A happy problem?

In the short term, with the divestment gains, it is probably a happy problem but if I do not put the money to more productive work, we would have to remove "happy" from the phrase. So, I put some of the money to work.

In the non-REIT space, in 1Q 2016, some readers might remember that I bought DBS, DBS and more DBS. Even now, DBS is trading at a discount to NAV and a relatively low PE ratio of about 8x. Paying out about a third of its earnings as dividends, the yield is almost 4%. 

Thanks to BREXIT, I was able to add to my investment in DBS as its share price declined, breaking a technical support. I would like to collect more on any further weakness.

In 2Q 2016, I also added to my investments in Starhub, VICOM, QAF Limited and Croesus Retail Trust on lower prices offered by Mr. Market.

Investing for income, I am interested in entities which have strong income generating abilities. Of course, they must pay meaningful dividends.


A handful of readers asked me for my thoughts on Croesus Retail Trust's proposal to be internally managed. It is quite interesting since it would be the first investment trust to be internally managed in Singapore if the deal is accepted by its unitholders.

All else remaining equal, internal management is a good thing for Croesus Retail Trust as it would mean that profits which would have gone to the external manager could be distributed to unitholders instead. The probability of conflict of interest between an internal manager and the unitholders will also be lower.

Of course, an external manager of any investment trust is a profitable enterprise, earning regular fees. No external manager in his right mind would give this up for a song. The price to internalise Croesus Retail Trust's manager is set at a princely sum of S$50 million.

For FY2015, the external manager recorded earnings of about S$500,000. Paying S$50 million to internalise the management would mean paying a PE ratio of 100x. Comparatively, ARA which manages a portfolio of REITs like Suntec REIT is trading at a PE ratio of about 15x. Go figure.

Although I like the idea of an internal manager for Croesus Retail Trust, I think paying S$50 million for this would be a price too high.

Post BREXIT, I also added to my investment in OUE Limited which I first blogged about in 2014 as a possible asset play. I basically paid 50c for what was worth $1.00. It was a smallish position as I was wary of the situation with Twin Peaks condominium. See my past analysis: here.

I decided to add to my investment because the situation with Twin Peaks has improved with many more units sold but the stock traded at an even bigger discount to NAV. While waiting for value to be unlocked, I will get some pocket money from the regular dividends OUE Limited declares.

Very much along the same line of thought, I decided to also increase my investment in Wing Tai Holdings. Although they have much more exposure to development properties compared to OUE, they have a stronger balance sheet. Mr. Market could be overly pessimistic. See my past analysis: here.

In 2Q 2016, I received income from:

1. APTT
2. ST Engineering
3. SPH 
4. PREH
5. QAF Limited
6. Wilmar
7. ARA
8. Hock Lian Seng
9. SCI
10. SMM
11. OUE Ltd
12. Hong Leong Finance
13. DBS
14. NeraTel
15. Accordia Golf Trust
16. Croesus Retail Trust
17. Starhub
18. Ascendas H-Trust


I hope I have not missed out anyone.

Total income received from non-REITs in 1H 2016:

S$ 58,545.01

That is about S$ 9,757.00 a month.

I will continue to nibble at stocks and if a correction in the magnitude of 10% or more should happen, I am prepared to buy much more.


Related posts:
1Q 2016 income from non-REITs.

Why Gardenia over NTUC Fairprice wholemeal bread?

I have a confession to make.

Last month, I switched from Gardenia wholemeal bread to NTUC Fairprice wholemeal bread after a couple of readers assured me that the latter has improved in quality.

I remember eating NTUC Fairprice wholemeal bread many years ago and found it dry (almost crusty) and bland tasting. It wasn't worth saving money and getting unpalatable bread, I thought.

Anyway, the fact is I decided to give NTUC Fairprice wholemeal bread another chance. Of course, the fact that there was some monetary savings compared to buying Gardenia wholemeal bread was an incentive for me.

Well, although I must admit that the texture and taste of NTUC Fairprice wholemeal bread have improved plus the fact that I saved some money, I have decided to switch back to Gardenia today. Why?

Look at the photos below:

NTUC Fairprice wholemeal bread. 300gm for $1.15.

Gardenia Super Soft & Fine wholemeal bread. 300gm for $1.90.

I was not getting good value for money with NTUC Fairprice wholemeal bread. Its lower price was a reason for me to make the switch last month and I was wrong.

I also found out that NTUC Fairprice wholemeal bread contains a lot more iron (8.8mg per 100g) compared to Gardenia (3.72mg per 100g) and we really don't need too much iron in our diet as we grow older. NTUC Fairprice wholemeal bread also has more saturated fats (2g per 100g) compared to Gardenia (0.86g per 100g). The levels of vitamin B1 (Thiamine) and B3 (Niacin) are lower compared to Gardenia's too.

Overall, Gardenia wholemeal bread seems like a healthier option to me and switching back to Gardenia will cost a bit more money but this is money well spent.

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QAF Limited: $1.14 a share is cheaper than 93c a share?

One year ago, when QAF Limited's stock was trading at 93c a share, I observed that the PE ratio was 16.6x and I said that to buy in at that price would be making an assumption that earnings could improve dramatically in the future. 

There were pertinent concerns such as rising costs of doing business as well as the weak Australian Dollar and how these could continue to weigh down performance.



Video added in November 2016.

Well, for the full year 2014, QAF Limited has exceeded expectations as earnings per share (EPS) improved 46.4% from 5.6c to 8.2c, year on year. With the Australian Dollar having weakened further against the Singapore Dollar, how did this happen?

There was a one off contribution by Oxdale Dairy through the sale of its dairy business. Group operating profit, thus, received a boost of $1.6m. This will not be repeated, of course. However, considering the fact that Group profit improved some $15.7m (before tax), not having this one off contribution in the current year would still mean that QAF Limited would do very well, everything else remaining equal.

All business segments did well but the lion share of the improvement came from Rivalea, an Australian business segment. Operating profits improved threefold although revenue stayed flat because of higher selling prices, better product mix, productivity gains and lower raw material costs.

Lower finance costs also helped QAF Limited to do better in 2014 as borrowings were pared down. Interest expense decreased $0.9m from $4.1m to $3.2m last year.

Today, QAF Limited's stock closed at $1.14 a share and based on an EPS of 8.2c, we are looking at a PE ratio of some 14x. Even if we remove the one off divestment gain by Oxdale Dairy, we would be looking at a PE ratio of 14.5x, thereabouts.

So, although QAF Limited's stock is priced higher now, compared to buying at 93c a share a year ago, it is actually cheaper at $1.14 a share. This is what I meant when I said that a stock could actually be cheaper although its price could be higher. It is about value, not price.

QAF Limited has made their first foray into China in October 2014. With operations in Singapore, Malaysia, Philippines and Australia stable and doing well, if their Chinese operations should prove successful, we could see things looking even better in the next few years. After all, the Chinese market is huge and bread is an accepted staple as well as convenience food.

A final dividend of 4c per share has been declared for a full year DPS of 5c. This DPS is probably sustainable and I look forward to receiving free bread again in future.

Related post:
QAF Limited: Rising 5c to 93c a share.