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Q&M continues to be a beneficiary of the pandemic; 'Buy' on share price weakness

Samantha Chiew
Samantha Chiew9/16/2021 03:02 PM GMT+08  • 3 min read
Q&M continues to be a beneficiary of the pandemic; 'Buy' on share price weakness
'Buy' Q&M on share price weakness as it has a sparkly white outlook.
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The increase in Covid-19 cases in Singapore lately may be causing a stir in the community, but for dental group Q&M Dental, this is an opportunity.

As such, CGS-CIMB and Maybank Kim Eng have kept their “buy” calls on the stock with target price of 89 cents and 85 cents, respectively. Furthermore, the stock has pulled back by about 20% from its recent peak following its 2QFY2021 results on profit taking and general market weakness. Hence, this creates a buying opportunity for investors who missed the previous rally.

With cases as at Sept 16 reaching over 800 and expected to reach over 1,000 by the next week, Singapore is ramping up its testing frequency. This bodes well for the group’s Covid-19 testing arm Acumen.

See also: Q&M's testing business is beginning to shine

The Singapore government announced on Sept 6 that testing measures will be enhanced, with increased scope and frequency of rostered routine testing for employees in higher-risk settings, and individuals issued with a health risk warning required to undergo PCR testing and self-isolate.

On Sept 13, it further announced that it will be increasing the frequency of testing for workers in higher-risk setting to once a week instead of fortnightly.

“With cases doubling every week, the country could see 1,000 daily cases in two weeks or possibly 2,000 daily cases in a month. As such, the government will further expand the coverage of these mandatory tests to other sectors, including those in retail, malls and supermarkets as well as delivery personnel and transport workers,” says MKE analyst Eric Ong, while noting that Covid-19 testing is set to become the new norm as Singapore aspires to be a nation of testing, where testing becomes a way of life in this endemic.

Adding on, CGS-CIMB analyst Kenneth Tan says, “We believe that the heightened number of Covid-19 cases should support Q&M’s 2HFY2021 testing revenue. In addition, we believe Q&M is gaining testing market share on the back of more tests awarded by the government in view of its reliable testing track record.”

On the other hand, the group’s dental operations are expected to continue to benefit from tight border controls.

“We expect core dental operations to continue benefitting from heightened footfall as border controls remain tight. While Singapore has opened vaccinated travel lanes with Brunei and Germany, we think Singaporeans are unlikely to resume travel to neighbouring Southeast Asian countries (often visited for cheaper dental services; such as Indonesia, Malaysia and Thailand) given the high number of daily Covid-19 cases recorded there,” says Tan.

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Hence, this should allow the group to continue growing its customer base of both locals and PRs.

“In addition, Q&M’s dental operations have historically been stronger in the second half of the year (on average, 2H dental revenue formed about 53% of full-year dental revenue over FY2011-FY2019) as patients tend to book dental appointments closer to the end of the year, in our view. New outlets opened in 1HFY2021 should also begin to ramp up,” adds Tan.

Overall, with both the increasing demand for testing and dental care, the analysts are expecting a rosy outlook for Q&M.

As at 3.00pm, shares in Q&M are trading at 58 cents or 4.6 times FY2021 book with a 5.6% dividend yield, according to CGS-CIMB’s estimates.

Photo: Q&M

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