Q&M Dental Group - UOB Kay Hian 2021-11-12: Robust 3Q21 Results & Positive Outlook; Confidence In Increased Stake In Acumen

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Q & M DENTAL GROUP (S) LIMITED (SGX:QC7)

Q&M Dental Group - Robust 3Q21 Results & Positive Outlook; Confidence In Increased Stake In Acumen

• Q&M Dental’s 3Q21 earnings of S$9.7m (+57% y-o-y) were in line with expectations, 9M21 core earnings met 73% of our full-year estimate. Both dental and medical laboratory delivered robust results.
• Q&M Dental added 14 new dental outlets (+12% y-o-y) and has increased its effective interest in Acumen from 51% to 67%, indicating a strong vote of confidence.
• We are positive on Q&M Dental’s outlook given its robust expansion plan and strong demand for testing services. Maintain BUY.

Q&M Dental's results in line, 3Q21 earnings grew 57% y-o-y and generous dividend payout.

• Q&M Dental Group (SGX:QC7)'s 3Q21 earnings of S$9.7m (+57% y-o-y) were in line with expectations, 9M21 core earnings met 73% of our full-year estimate.
• Both dental and medical laboratory delivered robust results due to strong demand for their services. Revenue contribution from dental and medical clinics increased 5% y-o-y to S$39m and contribution from the medical laboratory and dental equipment & supplies segment soared 932% to S$18m.
• Q&M Dental declared an interim dividend of S$0.01 per share (100% payout ratio) for 3Q21, which translates into a full-year dividend yield of around 7%.

Double-digit expansion of new dental outlets paves way for future growth.

• Q&M Dental has added our expected double-digit earnings growth in the dental segment.

Raising its effective stake in Acumen indicates a strong vote of confidence in the medical laboratory business.

• Q&M Dental’s associated company, Aoxin Q&M (SGX:1D4), recently acquired a tests in infectious diseases, sepsis and cancer.

Aggressive expansion in the number of new dental clinics from 2019 onwards.

• Q&M Dental has assume that Q&M Dental will add 10 new outlets in Singapore each year.
• Expect robust growth for 2021 driven by twin engines. We expect Q&M Dental’s core earnings to grow by 68% y-o-y to S$33m, driven by:
  1. an 18% y-o-y COVID-19 testing business, assuming 2,200 tests per day at the rate of S$70 per test.

Q&M Dental Group - Valuation

• We maintain the niche dental industry. Compared with its peers, Q&M Dental offers higher growth, ROE and dividend yield.
• See
  • Q&M Dental's Share Price,
  • Q&M Dental's Target Price,
  • Q&M Dental's Analyst Reports,
  • Q&M Dental's Dividend History,
  • Q&M Dental's Announcements,
  • Q&M Dental's Latest News.
• Catalysts:
  • Earnings surprise due to better-than-expected dental and COVID-19 testing businesses.
  • Better-than-expected dividend.
  • Value unlocking activities or takeover offer.

John Cheong UOB Kay Hian Research | https://research.uobkayhian.com/ 2021-11-12

SGX Stock Analyst Report BUY MAINTAIN BUY 0.78 SAME 0.78