Q & M DENTAL GROUP (S) LIMITED (SGX:QC7)
Q&M Dental Group - Officially Levelled Up
- Q&M Dental Group’s subsidiary Acumen Diagnostics was awarded a tender for the provision of COVID-19 swab and testing services.
- We expect Q&M Dental Group to potentially be able to conduct an additional ~900 daily tests across phase 1 sites, as highlighted in the tender.
- Reiterate ADD with an unchanged target price of S$0.97, pegged at 20x FY22F P/E. Potential catalysts include higher-than-expected number of tests performed.
Awarded tender for swab and testing services
- On 17 May 2021, Q&M Dental Group (SGX:QC7)’s 51% owned subsidiary, Acumen Diagnostics, was awarded a tender by the Health Promotion Board for the provision of COVID-19 swab and testing services in Singapore.
- Q&M Dental Group was one of six awardees of the tender. There were a total of 18 suppliers who bid for the tender. The tender entails the provision of PCR testing services for individuals residing in dormitories, as well as those going for testing at regional screening centres (RSC).
- As per the terms of the tender, successful awardees will be appointed from an unspecified date in May until Sept 2021, with an option to extend for up to six months (Oct 2021 to Mar 2022) depending on the performance of the provider.
- According to the tender document provided by the Health Promotion Board, the total number of daily tests conducted across all phase 1 and phase 2 sites (namely RSCs and dormitories) are estimated at ~5.5k and ~22k, respectively.
Boost to testing services contribution
- Assuming all awardees have an equal share of the tests (~17%), we estimate that Q&M Dental Group should be able to conduct ~900 tests per day just from phase 1 sites alone.
- Our current assumptions are 1,500 tests per day, and we see upside to our earnings per share estimate. Conservatively, due to lower ASPs and margins due to the competitive public tender, we expect potential earnings contribution from phase 1 sites of ~S$1m.
- We think phase 2 execution could be more feasible in the later part of 2021 as there have been no alarming cases observed yet in dormitories.
Reiterate ADD with unchanged target price of S$0.97, still on 20x FY22F P/E
- We reiterate ADD as we expect Q&M Dental Group to continue benefitting from the rising number of swab tests conducted daily (~89k as of 17 May 2021).
- See
- Our target price is based on a ~25% discount to peers due to its smaller market cap
- Key downside risks: increasing competitive pressure, rising employee costs.
- Potential re-rating catalysts: higher-than-expected number of tests performed.
LIM Siew Khee
CGS-CIMB Research
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Kenneth TAN
CGS-CIMB Research
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https://www.cgs-cimb.com
2021-05-18
SGX Stock
Analyst Report
0.970
SAME
0.970
