Q & M DENTAL GROUP (S) LIMITED (SGX:QC7)
Q&M Dental Group - Largest Private Dental Provider; Special Dividend & COVID-19 Test Kit Business Underappreciated
- Q&M Dental Group is an industry leader which has proven its ability to grow. Consensus believes its recent venture into the COVID-19 test kit business could provide upside surprise to earnings, while the core dentistry and medical services continue to grow, even during the pandemic.
- The sale of stake in dental equipment manufacturer, Aidite, could result in a special dividend of 2.2 cents (4.6% yield) from Q&M Dental Group, assuming a full payout of the net proceeds.
- Bloomberg consensus target price for Q&M Dental Group is S$0.54.
Industry leader expanding organically and inorganically.
- Over the past three years, Q&M Dental Group (SGX:QC7)’s organic growth has been respectable, as management strives to expand its top-line.
- Today, Q&M Dental Group leads the Singapore market with a total of 80 dental outlets across the country, at end-1H20 (1H17: 73 outlets). The company also has five medical outlets and one dental college. Elsewhere, Q&M Dental Group owns 33 dental outlets in Malaysia and one dental outlet in China (1H17: nine in Malaysia, one in China).
- Inorganically, Q&M Dental Group has ventured into healthcare-related businesses including medical technology, artificial intelligence (AI)-based dental diagnosis and treatment, as well as the establishment of a private dentistry college institution. The medical technology venture in Apr 20 was an acquisition for a 51%-stake in Acumen Diagnostics, which is involved in the manufacture, sales and distribution of diagnostic test kits for COVID-19 mainly in Singapore.
Growing dental and medical business; outlook positive.
- Despite the lockdowns caused by the COVID-19 global pandemic, Q&M Dental Group’s core dental and medical business remained resilient.
- In 1H20, revenue slipped 14% y-o-y to S$48.5m, while EBIT margin 17.0% (1H19: 13.9%) and earnings dipped 2% to S$8.1m.
- In Jun 20, Q&M Dental Group saw a recovery in dental revenue with a 20% increase in Singapore takings, compared to Jun 19.
- Going forward, Bloomberg consensus estimates a 28% growth in Q&M Dental Group's revenue to S$141.1m and 39% EPS growth to 3.2 cents in 2021.
Special dividend from disposal of remaining stake in Aidite.
- On 15 Jan 21, Q&M Dental Group entered into a share purchase agreement to sell its remaining 12.2% stake in dental equipment manufacturer, Aidite. If completed, Q&M Dental Group will receive net proceeds of S$17m, which has been earmarked for:
- working capital;
- business expansion; and
- special dividend to shareholders.
Valuation at discount to Singapore healthcare peers.
- At S$0.48, Q&M Dental Share Price trades at 15x 2021F P/E based on consensus EPS estimate of 3.2 cents. This is at a 13% discount relative to other Singapore-listed healthcare services peers which trades at an average 17.2x 2021F P/E.
- Bloomberg consensus target price for Q&M Dental Group is at S$0.54.
- Notably, the actual EPS in 2017 and street estimate for 2020 EPS showed that Q&M Dental Group was superior over peers, with a CAGR of 8.5% compared to TalkMed (SGX:5G3) (-3.1%) and Singapore Medical Group (SGX:5OT) (flat). Despite that, relative share price performance against them has lagged considerably, with Q&M Dental Share Price at -33%, TalkMed Share Price at -14% and Singapore Medical Group Share Price at -3%.
Key catalysts include:
- Recent investments, particularly Acumen kits could results in earnings surprises. To recap, in its May 20 announcement, Singapore’s Ministry of Health has set a target of 40,000 COVID-19 tests per day.
- See Q&M Dental Share Price; Q&M Dental Target Price; Q&M Dental Analyst Reports; Q&M Dental Dividend History; Q&M Dental Announcements; Q&M Dental Latest News.
- Other catalysts include better-than-expected 2020 financials, and potential surprise for special dividend.
Singapore Research
UOB Kay Hian Research
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https://research.uobkayhian.com/
2021-02-08
SGX Stock
Analyst Report
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SAME
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