Outlook bright with expansion and a spin-off
Even before the pandemic, Q&M Dental Group (Singapore) was already Singapore’s largest private dental chain with 90 clinics across the country. It also has 37 clinics in Malaysia and one in China. When the pandemic struck in 2020, Q&M, led by CEO Dr Ng Chin Siau, was able to tap new opportunities. Seeing how testing for Covid would practically become a way of life, it went big into testing services, acquiring Acumen Diagnostics, which sells and distributes Covid test kits on top of providing Covid-19 lab-testing capabilities. That paid off.
As Q&M’s 9MFY2021 ended September 2021 numbers show, revenue rose 36% y-o-y to $116.6 million while earnings nearly doubled to $27.3 million, thanks to maiden contributions from testing services even as revenue from core dental services grew.
During 3QFY2021, Q&M declared a bonus dividend of 1 cent for its shareholders. This was the same as the interim dividend of 1 cent declared for 1QFY2021 and 2QFY2021 each.
In the past 12 months, the stock was up 55% to trade at 59 cents on Jan 24.
With its impressive growth as well as rosy outlook, analysts like Maybank Securities’ Eric Ong are upbeat on this stock even though its revenue mix might change.
Ong, who has a “buy” call and 78 cents target price, expects polymerase chain reaction (PCR) testing to be reduced moving forward as it will be mainly reserved for unwell people. To mitigate the fall in Covid-19 swab tests, Ong says Q&M is looking to develop a panel of new PCR assays in infectious diseases, dengue sepsis and cancer. It also plans to distribute antigen rapid test (ART) self-test kits once it obtains a licence from the Ministry of Health, pitting Q&M head-to-head against five brands in the market currently.
“With the easing restrictions, we believe the group is well-positioned to cater to the pent-up demand for primary and higher value specialist and/or elective dental services to its patients,” Ong adds.
Similarly, DBS Group Research analyst Paul Yong has a “buy” rating with an 80 cents target price. With the stock trading at just around 15 times earnings and giving an attractive yield of 6.1%, Yong sees its valuations as “undemanding”.
Meanwhile, Q&M has big plans for Acumen. On Jan 17, it announced that Acumen is exploring a Nasdaq listing. Q&M favours Nasdaq for its its focus on technology and innovation stocks. It believes that this listing will give Acumen and by extension, Q&M, ready access to capital from the world’s largest economy, an expanded investor base and an additional source of financing. It will also be an opportunity for Q&M to enhance its corporate profile as it seeks to further expand its business.
If Acumen gets on Nasdaq, this will not be Q&M’s first spin-off listing. It had previously spun off its China dentistry business Aoxin Q&M Dental Group with a Catalist listing on the local bourse in 2017. In the past 12 months, the stock is up some 29% to trade at 24 cents on Jan 21.
For Q&M, it plans to open 30 dental clinics in Singapore and Malaysia yearly from 2022, which will give it a bigger footprint to capture more patients and enjoy cost efficiencies.