Our opinion on the current state of QUANTUM(QFH)
Quantum (QFH) is in the chicken business, operating through four divisions: Animal Feeds, Eggs and Layers, Broilers, and an African Division where it sells related products. Quantum was significantly impacted by the drought in Southern Africa, but since that abated and the price of animal feeds came down, it has benefited from much higher prices of eggs and the lower cost of feeds. In general, the chicken business is a tough industry. It is labour-intensive, creating exposure to union action, involves large quantities of working capital tied up in stock and, to a lesser extent, debtors. The business is subject to unexpected disease threats like avian flu or Newcastle disease and has experienced the dumping of cheap chicken onto the South African market from Europe, Brazil, and America.
With top-class management, a sustainable profit can be achieved, but the industry is regarded as relatively high risk by investors, which accounts for its low price-to-earnings (P:E) multiple and its high dividend yield (DY). The unprotected strike at Kaalfontein Farm has restricted output and cost an estimated R10m. The company suffered an outbreak of HPAI at its Lemoenkloof Farm, as well as loadshedding and labour unrest.
In its results for the six months to 31st March 2024, the company reported revenue down 13% and headline earnings per share (HEPS) of 21.7c compared with 2.9c in the previous period. The company said, "During the current reporting period, the average price of yellow maize on the South African Futures Exchange (“SAFEX”) decreased by 16.6%; and the average landed price (Cape Town harbour) of soya meal decreased by 5.7%". Nobody knows what difficulties the business may experience over the next 12-month period. So, if you plan to invest in this share, be prepared for considerable volatility. This company sometimes has difficulty in passing on higher raw materials costs to consumers, especially in the current economic environment.
On 7th March 2024, the company announced that 9.77% of its shares had been sold by Astral Foods. This sale caused the share to jump by about 73% because there is apparently a takeover battle looming. On 13th March 2024, the company announced that it had received a letter from Country Bird Holdings (CBH) indicating that it had no intention of making a takeover bid.
With top-class management, a sustainable profit can be achieved, but the industry is regarded as relatively high risk by investors, which accounts for its low price-to-earnings (P:E) multiple and its high dividend yield (DY). The unprotected strike at Kaalfontein Farm has restricted output and cost an estimated R10m. The company suffered an outbreak of HPAI at its Lemoenkloof Farm, as well as loadshedding and labour unrest.
In its results for the six months to 31st March 2024, the company reported revenue down 13% and headline earnings per share (HEPS) of 21.7c compared with 2.9c in the previous period. The company said, "During the current reporting period, the average price of yellow maize on the South African Futures Exchange (“SAFEX”) decreased by 16.6%; and the average landed price (Cape Town harbour) of soya meal decreased by 5.7%". Nobody knows what difficulties the business may experience over the next 12-month period. So, if you plan to invest in this share, be prepared for considerable volatility. This company sometimes has difficulty in passing on higher raw materials costs to consumers, especially in the current economic environment.
On 7th March 2024, the company announced that 9.77% of its shares had been sold by Astral Foods. This sale caused the share to jump by about 73% because there is apparently a takeover battle looming. On 13th March 2024, the company announced that it had received a letter from Country Bird Holdings (CBH) indicating that it had no intention of making a takeover bid.
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