SINGAPORE (June 1): Phillip Capital says it likes Aoxin Q&M Dental Group after analyst Soh Lin Sin attended the official opening of the group's new dental hospital, Panjin Aoxin Q&M Stomatology Hospital, in Liaoning Province, Northern China on May 20.
On top of this new dental hospital, the group also plans to add three to five new dental centres (hospital or clinics) every year in Liaoning Province, penetrating into the underserved market there.
Currently, its expansion strategy is on-track, with the addition of new dental hospital in Panjin city, potential acquisition of Youxin Dental Clinic, and the opening of a new dental clinic in a shopping mall (Kaisa Commercial Centre).
See: Aoxin Q&M acquires dental clinic in China for $4.13 mil
With this, the group will be able to create a diversified portfolio to capture the full potential of dentistry market in Northeast China, while also streamlining procurement processes across the group, as well as ensure quality of services and products.
Meanwhile, the group’s wide network of dental centres will help it form a self-sustaining business ecosystem as it expands its dental centres to provide a platform to groom the young dentists and other dental related professions.
In addition, the group has been leveraging on technology to accelerate growth, bring innovation and enhance operating efficiencies, providing it an edge compared to the smaller players who could not afford such high CapEx investments.
In an unrated report on Friday, Soh, during her site visit saw that the group’s dental laboratories use computer-aided design and manufacturing (CAD/CAM) technology to improve the design and creation of dental prosthesis and minimise waste.
Soh also likes the group for its clean balance sheet. As at end-FY17, it has zero debt with a cash position of RMB 95.3 million ($19.9 million), as well as strong operating cash flows generated at RMB 11 million per annum to support its intensive extension plan.
However, some investment risks to the group include the issuance of new shares to partially fund its acquisitions, which could be dilutive to current shareholders; higher staff costs as it ramps up recruitment drive to support its expansion plans; and startup costs.
As at 11.30am, shares in Aoxin Q&M are trading at 22 cents.
