Deep-dive 2021-12: QAF

QAF Limited (QAF SP) is the largest bakery company in Singapore, Malaysia and the Philippines.

The company owns two major brand names called Gardenia and Bonjour and operates in the short shelf-life bread segment, supplying supermarkets, convenience stores, restaurants, etc.

On 8 June 2021, QAF announced that it would divest its unprofitable and cyclical meat production business Rivalea for a total consideration of SG$152 million (27% of market cap). Following this transaction, QAF will become a pure-play bakery stock similar to President Bakery and Indosari.

Short-shelf life bread is a winner-takes-it-all industry. QAF enjoys market shares of 60% in Singapore and Malaysia and close to that number in the Philippines. The reason is the need for proximity to key markets and a logistics network that can supply each retail outlet within 1 day of production (giving them 4 days to sell the products). In addition, supermarkets typically have a right of return. If the returns are higher than …