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Acquisitions positive for Q&M Dental Group, core business still resilient: KGI Securities

Lim Hui Jie
Lim Hui Jie • 3 min read
Acquisitions positive for Q&M Dental Group, core business still resilient: KGI Securities
KGI Securities are positive on Q&M's acquisition of Acumen Diagnostics, saying it will boost short term profits.
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KGI Securities’ Joel Ng and Amirah Yusoff have initiated coverage for Q&M Dental Group with an “outperform” rating and a target price of 54 cents.

The analysts said Q&M has remained resilient with its dental and medical services through Covid-19. It continues to be “the bread and butter” of the Group, as its network of clinics dominates the private dental healthcare space.

Through Covid-19, although business at its clinics were somewhat affected during the circuit breaker period of April to June 2020, demand has quickly bounced back. As a result, its dental and healthcare services remain its core strength and will continue to lend a greater level of stability to the business.

They note Q&M currently owns the largest network of private dental outlets in Singapore with over 80 clinics island-wide, and the Group is still aiming for further expansion in Singapore and Asia.

Its dental and medical clinics remain the core segment of its business, contributing to more than 90% of its FY2019 revenue.

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They said Q&M’s management has continuously dedicated itself to expanding into other healthcare segments such as medical technology, AI and even specialized education to provide additional value to its shareholders.

Furthermore, after the disposal of its stake in Aidite “for a sizeable profit”, the Group also ventured into artificial intelligence (AI) medical technology in partnership with International Medical University (IMU) Malaysia – in an effort to champion AI-based diagnostics and treatment.

Most notably, Ng and Yusoff highlighted Q&M’s venture into medical technology firm Acumen Diagnostics in April, and said this will provide a “strong but short-term boost” to earnings within the next two years.

Acumen Diagnostics has been mainly involved in the manufacture, sale, and distribution of diagnostic test kits for Covid-19, in Singapore and internationally.

See: Avarga's Taiga unit to post 3Q earnings of 78% q-o-q on higher lumber prices and strong demand: KGI Securities

They expect the business to contribute “positively, and significantly”, to Q&M in the short-term as combatting the virus still remains an immediate and foremost priority for many countries globally.

The analysts also do not expect the implementation of vaccines to impact significantly on the rate of testing, as Covid-19 testing will still be needed to ensure the efficacy of vaccines, and even to confirm the absence of any virus transmission within the community.
They conclude that Q&M continues to generate stable and resilient earnings, and we foresee no material changes in or threats to its market share in the private dental space in the medium term.

As at 12.40pm, shares of Q&M were trading at 47.5 cents, with a FY2020 price to book ratio of 2.79 and dividend yield of 2.5%.

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