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Background and overview of Quantum Foods (QFH)
Quantum Foods is a focused primary agricultural business that has three focus areas namely animal feeds, eggs & layer livestock, broilers and related businesses on the African continent outside South Africa. See www.quantumfoods.co.za
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Share price over the last 12 months (Graph and table obtained from Moneyweb.co.za)
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Share price performance over various periods
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Scroll over or click on the funnel chart to get more details of QFH 30 September 2015 financial results.
Interesting to note in September 2015 QFH held R40 000 000 in Zambian Kwacha (ZMW), this equates to roughly 31million Kwacha. It cost on average around R1.35 per ZMW. The current cost per ZMW is around R1,45 per ZMW. Thats a 10c per ZMW depreciation of the Rand. Effectively scoring QFH around R3,1million in cash, as the depreciating currency (Rand) reflects positively on QFH's books as the 31million ZMW is now worth 10c more per ZMW
Based on QFH's financial results for the year ended 30 September 2015, a simple valuation based on cash generated from operations and PE ratios yields a relatively conservative valuation for QFH's of around R6.10 per share. This will put the share on a PE ratio of 11.3 (which is not that expensive by any stretch of the imagination)
Below a breakdown of QFH's revenue per division and operating profit per division. Notice the small contribution their African operations (operations outside of South Africa), makes to their revenue versus its contribution to their overall operating profits. Massive margins they getting there.
Below a valuation for Quantum Foods based on South African Market Insights Valuation model
Quantum foods is valued at between R4.80 and R5.00. This will put the share on a PE ratio of 9 and a dividend yield of 2%. We believe at current depressed prices the share offers significant value. This valuation has taken into account a possible decline in earnings for the next two years due to drought conditions in Sub-Saharan Africa (where QFH) mainly operates. But over the long term they do offer significant value, they generate sufficient cash and is looking to expand into Africa where their margins seem extremely strong compared to South Africa. Margins in SA is probably lower due to greater competition experienced here.
We use our Share Valuation Calculator as guide to valuing shares. We believe in value investing and our above mentioned share valuation is based on the underlying fundamentals and financial statements of the stock in question.
We use our Share Valuation Calculator as guide to valuing shares. We believe in value investing and our above mentioned share valuation is based on the underlying fundamentals and financial statements of the stock in question.