Q&M Dental Group's 3Q21 Results - Phillip Securities 2021-11-19: Testing Services Drove All The Growth


Q&M Dental Group's 3Q21 Results - Testing Services Drove All The Growth

  • Q&M Dental Group (SGX:QC7)'s 3Q21 PATMI rose 69% y-o-y to S$9.5mil. Earnings modestly exceeded our expectations, at 78% of our adjusted FY21e forecast. All the growth was from COVID-19 PCR test.
  • Dental PATMI is estimated to have declined around 18% y-o-y in 3Q21. Q&M Dental is on track for a record 17 new clinics in Singapore this year.
  • We are raising our FY21e PATMI forecast by 8% due to higher PCR test earnings. Our BUY recommendation for Q&M Dental is maintained. The target price for Q&M Dental is maintained at S$0.82 (post bonus issue).
  • Q&M Dental's core dental operations are valued at 25x P/E, in line with industry peers. The PCR test business is valued at recently transacted S$60mil. Listed associate, Aoxin Q&M (SGX:1D4), is valued at market price with a 20% discount.

The Positives

COVID-19 PCR test drove earnings growth.

  • Net profit from PCR tests expanded 47% q-o-q to S$4.4mil. It accounted for all the earnings growth this quarter. The surge in COVID-19 cases has resulted in a spike in test requirements. We model around S$11mil net earnings from PCR tests in FY21e. We are expecting slower PCR testing revenue as the authorities transit to antigen rapid test (ART) as the default mode of testing.

Record expansion in clinics.

  • In 3Q21, Q&M Dental added 3 new clinics in Singapore. There are plans for another 9 to 10 clinics in 4Q21. The 17 new clinics in 2021 would represent a record expansion for the company. In 2019, Q&M Dental added 7 new clinics but the pandemic stalled expansion plans in 2020.

Another quarterly dividend.

  • Q&M Dental announced another quarterly dividend of S$0.01 during the quarter. This is the 3rd consecutive quarterly dividend of S$0.01. No guidance or dividend policy was mentioned. The dividend yield for FY21e is around 6%.

The Negative

Dental earnings declined.

  • Earnings from the core dental business were surprisingly weak. Q&M Dental's dental revenue only rose 5% y-o-y. We believe the lockdown in Malaysia and surge in pandemic cases in Singapore may have stifled visitations for the company.


  • The record new clinics in FY21 would be a major revenue growth driver in FY22e. Q&M Dental has added much more resources in the recruitment, training and setting of new clinics. The objective is to annually expand 20 new clinics in Singapore per year.
  • Whilst we raise forecast for PCR earnings in FY21e, FY22e estimates are unchanged. Authorities are transitioning more towards ART as the main mode for testing PCR patients. PCR will still be an important testing tool for travel and confirmation of COVID-19 patients for hospitalization. Unclear if Acumen will be developing or commercialising ART test kits.

Maintain BUY with unchanged target price of S$0.82 (post bonus issue)

Paul Chew Phillip Securities Research | https://www.stocksbnb.com/ 2021-11-19
SGX Stock Analyst Report BUY MAINTAIN BUY 0.820 SAME 0.820