-->

Q&M Dental Group - CGS-CIMB Research 2021-08-16: Give Me A Share Of That; Aoxin Q&M To Acquire 49% Of Acumen Diagnostics

Q & M DENTAL GROUP (S) LIMITED (SGX:QC7) | SGinvestors.io Q & M DENTAL GROUP (S) LIMITED (SGX:QC7)

Q&M Dental Group - Give Me A Share Of That; Aoxin Q&M To Acquire 49% Of Acumen Diagnostics

  • Q&M Dental Group's associate Aoxin Q&M has proposed to acquire 49% of Acumen Diagnostics. Purchase consideration is S$29.4m via issuance of new ordinary shares.
  • Post-acquisition, Q&M Dental Group will hold a ~33% effective stake in Aoxin Q&M (vs. 44% now). Acquisition to be completed within six months of announcement date.
  • We estimate ~8% FY22F EPS accretion as this should support Aoxin Q&M’s turnaround (from FY20 net loss of RMB12m). Reiterate ADD on Q&M Dental Group at target price S$0.97.



Proposed 49% acquisition of Acumen Diagnostics

  • On 16 Aug 2021, Q&M Dental Group (SGX:QC7)’s ~44%-owned associate Aoxin Q&M (SGX:1D4) proposed to acquire a 49% stake in Acumen Diagnostics, Q&M Dental Group’s 51%-owned testing services subsidiary.
  • The acquisition will be conducted via allotment and issuance of new ordinary shares, with an expected purchase consideration of S$29.4m. The per-share consideration of S$0.231 represents a 38% premium to VWAP of S$0.168 on 13 Aug 2021.
  • The acquisition implies a P/E of ~3x, which looks attractive to us.
  • After completion, Q&M Dental Group’s effective stake in Aoxin Q&M will be ~33%, down from its current 44% stake.


Accelerating Aoxin’s turnaround

  • At end-FY20, Aoxin Q&M recorded a net loss of RMB12m (vs. RMB14m in FY19). In 1H21, Aoxin Q&M’s net loss came in at RMB6m (vs. RMB10m in 1H20).
  • In our view, Aoxin Q&M’s return to profitability is around the corner given continued strong demand for testing services in Singapore, which should support FY22F net income.
  • We expect Aoxin Q&M’s share of Acumen earnings at S$10m in FY22F (~Rmb47m), which should contribute positively to PBT.
  • See Aoxin Q&M's share price; Aoxin Q&M's announcements.

~8% FY22F EPS accretion for Q&M, valuation gains are a boost






Kenneth TAN CGS-CIMB Research | LIM Siew Khee CGS-CIMB Research | https://www.cgs-cimb.com 2021-08-16
SGX Stock Analyst Report ADD MAINTAIN ADD 0.970 SAME 0.970



Advertisement



MOST TALKED ABOUT STOCKS / REITS OF THE WEEK



loading.......