Q&M Dental Group (Singapore) Limited
Intrinsic Value S$0.400
Prev Closing S$0.310
Steady Growth in the Core Dental Business
Q&M Dental Group (Singapore) Ltd (Q&M) announced steady 2Q FY13 results with revenue rising 21% YoY to S$15.7m. The rise of S$2.7m is mainly attributable to the opening of five new dental outlets (add S$1.1m) and incremental revenue of S$1.6m from existing clinics. The latter represents organic growth of 12.3% YoY. In 2Q, Q&M also recorded S$38,000 revenue from the set-up of new medical and aesthetics clinics.
With the healthy revenue growth and organic growth, PBT of the core dental business improved by S$0.16m YoY to S$1.19m – operating expenses are kept under control. However, PAT dipped 21% YoY to S$0.9 mainly due to start-up losses in the new medical clinics and aesthetic centre (about S$0.23m) and reduced profit from the dental equipment and supplies distribution (about S$0.13m). Though losses from the former may persist for the next three quarters, we reckon that it will bring about growth potential for Q&M in the long term. Q&M is targeting corporate clients and patients who are under the government scheme for its medical services. The company also declared 0.64 S cents interim dividend this time round vs 0.30 S cents in the corresponding period to reward shareholders and to lessen its cash position. The company had S$30.6m cash which is more than enough to finance the S$21.6m acquisition of Aoxin Stomatology Group.
We are now adjusting our PAT for FY13 to incorporate potential losses from the new medical clinics and aesthetic centre. However, we reckon that the impact will be short term and that the new service offerings may instead bring about higher growth potential for Q&M. We will wait to see the performance of this segment. Maintain Increase Exposure at S$0.400.
Publish date: 14/08/13