SINGAPORE (Nov 29): OCBC is maintaining its “buy” call on multi-industry food company QAF with a fair value of $1.46 given supportive growth conditions like favourable raw material prices due to ample global supply.

“The projection by ABARES for wheat crop in Australia is set to reach about 29.1 million metric tonnes, albeit some recent concerns due to frost damage,” says lead analyst Jodie Foo in a Tuesday note.

While revised projections for the harvest season in Australia only comes out in December, the International Grain Council has also raised global grains production to 2,084 million metric tonnes, up 4% compared to last year, notes Foo.

QAF is the one of the leading regional players in baked goods, with its Gardenia brand remaining the leading company in the baked goods segment in Singapore, Malaysia and the Philippines.

QAF currently holds an estimated 24% market share in Singapore, 20% in Malaysia and 13% in Philippines. Market share in Malaysia is expected to increase with the discontinuation of the High 5 Brand.

In 3Q16, QAF showed continued positive underlying earnings growth with PATMI up 84% to $19.4 million as underlying sales increased for all segments, while Bakery and Rivalea enjoyed lower raw material costs. 3Q16 earnings have also been above expectations.

“Overall outlook for the Bakery division also remains decent, as the overall baked goods market is expected to increase in retail value at a range of 2% to 4% CAGR for the three markets,” says Foo.

Shares of QAF are trading flat at $1.32.