QAF the DOUGH maker. $0.70 and will only go higher.

Here I am after a long sunday, sitting in front of the computer writing a note on a stock which I feel is a compelling buy and a great value stock. Without a doubt, it is once again a stock that does not have too much liquidity. So I am not going to ask you to buy it like a contra stock. I spent the past 2 weeks looking at the company and only now do I have the time to write about it. That is why I am sacrificing my sleeping time to write. The fact that I suffer from constant insomnia does not undermine this effort of mine to get this note out there before the stock begins its big move.

Ok due to the short time I have and not wanting to eat too much into my sleeping time, I will cut a long story short. The stock in mind is QAF. Never heard of it? How about Gardenia? QAF is a leading multi-industry food company with core businesses in Food Manufacturing, Bakery, Primary Production, and Trading and Logistics. They have a growing and strategic network of operations and alliances across the Asia-Pacific region, including Singapore, Malaysia, the Philippines, China and Australia.

Why I like it? It has a strong network, valuation is cheap, business is easy to understand and last but not least, it is under-researched by analysts. The valuation is cheap because they are currently only trading at 4.9 times trailing p/e and with the economy coming back to normal, we can expect their profitability to improve further. For year 2009, they made $59 million and that was driven mainly by their primary production division Rivalea, which deals in farming of pork and it is the largest exporter of pork in Australia. The sum of parts for the company is definitely worth more than the current NAV because I believe that their intangible assets like their Farmland and Gardenia brands are household names for South-east Asian countries are undervalued.

The only division that is not doing well is their apple juice division, but this is a small division and it should not be a drag. I like this company because this is a company that is dealing with businesses that are very cash driven and inelastic demand. This is the exact description of a brick and mortar company. The cash flow is constantly strong, over the past two years, cash flow from operations have averaged S$90 million, which is really impressive.

Revenue for the company stands at a very nice 2.55 times of its market capitalization. I know, I will definitely go down into history as a brick and mortar investor, but honestly I do not know how to value stocks that are all about growth potential. Potential to me is just promise that has not been delivered. Which means it stands for nothing.

QAF has been there since my primary school days and years before that. I remember, I had a classmate whose father was sitting on the board of directors. For me, if the analysts are not looking at it, that is always a good sign. Do not miss out on this opportunity, because if you have missed my other calls then this is something that you should not miss.

As for my previous posts, one of my followers have said that he is holding 2 stocks that I recommended. Auric and United Overseas Australia, but I have to say that both have been slowly creeping up. Look at Lion Asiapac, it was not moving for some time after I made a call for it, but suddenly, it has shot up because of the special dividend. So it shows, good things come to those that wait. Be patient and the money is going to come.

Gotta sleep now, big week ahead. Big decisions to be made. Have a good week ahead and happy trading.

Best,

SVI