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KGI sees promising growth in Q&M; initiates coverage

Samantha Chiew
Samantha Chiew • 2 min read
KGI sees promising growth in Q&M; initiates coverage
KGI Securites likes Q&M for its growth potential. Photo: Albert Chua/ The Edge Singapore
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KGI Securities is initiating an “outperform” recommendation and a 35 cents target price on Q&M Dental Group , as analyst Tang Kai Jie sees promising organic growth from the group.

Amid a saturated dental market in Singapore, the group is shifting its stance to focusing on organic growth to increase the efficiency and effectiveness of its business process in each clinic. The company has rolled out several new technological initiatives, such as a new dental mobile application and the integration of new dental technologies.

The group has also recently announced the integration of Align Technology’s latest iTero Lumina Intraoral Scanner across its dental clinics in Singapore. The iTero Lumina intraoral scanner will be deployed over the next 12 months in phases across their clinics in Singapore.

In January this year, Q&M entered into a joint venture (JV) agreement with EM2AI Professional HoldCo and its 49%-owned subsidiary, EM2AI. EM2AI Professional has also agreed to provide an interest-free loan of about $3.7 million to EM2AI. “This JV agreement brings about more capital to be invested into more AI capabilities to drive growth for the company,” says Tang.

To recap, the group had recorded a 2% y-o-y increase in its FY2023 ended December 2023 earnings to $11.5 million. Revenue saw a marginal 1% increase to $182.7 million.

See more: Q&M posts 2% increase in FY2023 earnings to $11.5 mil; Aoxin Q&M narrows losses by 30% to RMB 47.3 mil

See also: Brokers' Digest: Prime US REIT, Hongkong Land, Yangzijiang Shipbuilding, SIA, CICT, ST Engineering, OUE REIT, Wilmar

With 106 dental clinics across Singapore, the group boasts the most extensive network of dental clinics in Singapore, holding around 11.2% of the market share. The company positions itself as an affordable and convenient dental service provider, and this puts the company in a prime position to capture the majority of the demand for dental services in the Singapore market.

The way Tang sees it, dental services are usually stickier and recurring in nature as consumers are likely to return to the clinic for additional consultations or check-ups. Technological improvements to the company's business processes also support customer loyalty, as customers who can access their information easily are likely to return to the same clinic for subsequent check-ups.

“Q&M’s resilient business, as well as its investment into dental AI & technology, positions the company well for future growth and capture the majority of dental services demand in the local market,” says Tang.

Shares in Q&M closed 2% lower on May 31 at 24 cents.

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