Food firm QAF offers shares as dividends

FOOD group QAF has proposed to pay out dividends in the form of shares in two associate companies.

The move is part of a plan to pass on remaining tax credits, which can be used to set off a shareholder's tax bill, if their personal tax rate is below the corporate rate.

The company, best known for its Gardenia bread, said yesterday that its shareholders will get 973 PSC shares and 284 Zhongguo Jilong shares for every 1,000 QAF shares they own.

At their last traded prices, this values the payout at a total of $53.7 million. Both PSC and Jilong shares were last traded at 9.5 cents apiece.

That means for every 1,000 QAF shares, investors are getting a bonus worth $119.42 at current prices.

The move comes as a number of companies are scrambling to use up their tax credits by year-end when they will expire.

Apart from distributing special cash dividends, many have also opted to give out the cash while offering investors the right to invest that cash back into the company.

QAF has about $11.3 million worth of tax credits, which will allow it to distribute about $51.5 million worth of dividends net of tax.

After accounting for tax credits that will be used for a proposed two cent-per-share final dividend, QAF will still be able to pay out $44 million worth of dividends net of tax.

The company said the share giveaway will unlock and return value to its shareholders without affecting its cash flow.

As at Dec 31, it had a cash hoard of $52.2 million, down from $70 million the previous year.

QAF added that the distribution will enable its shareholders to be direct investors of PSC and Jilong, giving them the flexibility to sell the shares in the market for cash if they wanted to.

If the payout goes through, both PSC and Jilong will cease to be associate companies of QAF as the company will be distributing almost all of its 23.4 per cent PSC stake and 23.9 per cent Jilong interest to its shareholders.

QAF shares closed unchanged at 51.5 cents yesterday, ahead of the announcement.

bryanlee@sph.com.sg



PROPOSED PLAN



QAF, best known for its Gardenia bread, will give out Zhongguo Jilong and PSC shares.