Maybank Kim Eng’s Eric Ong has initiated coverage on dental chain operator Q&M Dental Group with a “buy” call and 87 cents target price.

The target price, according to Ong in his March 29 note, is pegged to 22 times FY2021 estimate earnings, which is a 15% discount off the sector average of 26 times.

Ong expects Q&M to record a faster compounded annual growth rate of around 30% for FY21 to FY23, versus 14% managed in FY198 – FY20, with growth driven by more clinics.

New growth is likely from its Covid-19 tests business, specifically, from its 51%-owned Acumen’s Covid-19 diagnostic segment.

Ong notes that throughout the pandemic, dental revenue has proven to be resilient. To maintain its competitive edge, the Q&M has also made inroads into the development of advanced technology in healthcare with the establishment of EM2AI (formerly known as Q&M Dental AI) in 2018.

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SEE:Q&M Dental Group sees 10% growth in FY20 earnings to $19.7 mil; group revenue surpasses pre-Covid-19 levels

The company plans to launch the ethical AI enhanced guided dental treatment plan in Singapore this year, which should help to cater to the rising customer demand for higher value specialist dental healthcare services.

Going forward, Q&M aims for a bigger market share with a target of opening up to 30 outlets a year from 2021 onwards in Singapore and Malaysia for the next 10 years.

Ong notes that new growth targeted by the company will be more organic in nature, from its core dental business, rather than from one-off gains or from associate companies. 

As at 4.07 pm, Q&M traded at 62.5 cents, up 3.31% for the day.