Our opinion on the current state of QUANTUM(QFH)
Quantum (QFH) operates in the poultry industry, encompassing four divisions: Animal Feeds, Eggs and Layers, Broilers, and an African division selling related products. Despite challenges from the drought in Southern Africa, Quantum benefited from decreased animal feed prices and increased egg prices once the drought subsided. However, the chicken business remains fraught with challenges, including labor intensity, susceptibility to diseases like avian flu, and the dumping of cheap imports from Europe, Brazil, and America.
The business is highly sensitive to external disruptions such as disease outbreaks, union actions, and power outages, making it high-risk for investors. This is reflected in its low price-to-earnings (P:E) ratio and high dividend yield (DY). The company recently faced an unprotected strike at Kaalfontein Farm, costing around R10 million, and an outbreak of HPAI (avian flu) at Lemoenkloof Farm, which had a significant financial impact.
For the fiscal year ending September 30, 2023, Quantum reported a 15.5% increase in revenue but a headline loss of 17.4c per share, reversing from a profit the previous year, largely due to the impacts of HPAI. As of the four months ending January 31, 2024, the company noted improvements in margins due to reduced feed costs and less frequent power outages. However, the threat of HPAI remains a significant concern for the remainder of the financial year.
The recent sale of a 9.77% stake by Astral Foods sparked a substantial share price increase due to speculation about a potential takeover, which added to the company's volatility. Subsequently, on March 13, 2024, Country Bird Holdings (CBH) clarified that it had no plans to make a takeover bid, settling some of the speculative activity around Quantum's shares. Investors should be wary of the high level of volatility and the array of challenges that could impact Quantum's operational and financial performance.
The business is highly sensitive to external disruptions such as disease outbreaks, union actions, and power outages, making it high-risk for investors. This is reflected in its low price-to-earnings (P:E) ratio and high dividend yield (DY). The company recently faced an unprotected strike at Kaalfontein Farm, costing around R10 million, and an outbreak of HPAI (avian flu) at Lemoenkloof Farm, which had a significant financial impact.
For the fiscal year ending September 30, 2023, Quantum reported a 15.5% increase in revenue but a headline loss of 17.4c per share, reversing from a profit the previous year, largely due to the impacts of HPAI. As of the four months ending January 31, 2024, the company noted improvements in margins due to reduced feed costs and less frequent power outages. However, the threat of HPAI remains a significant concern for the remainder of the financial year.
The recent sale of a 9.77% stake by Astral Foods sparked a substantial share price increase due to speculation about a potential takeover, which added to the company's volatility. Subsequently, on March 13, 2024, Country Bird Holdings (CBH) clarified that it had no plans to make a takeover bid, settling some of the speculative activity around Quantum's shares. Investors should be wary of the high level of volatility and the array of challenges that could impact Quantum's operational and financial performance.
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