QAF

[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.