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?