KGI Securities is maintaining an "outperform" rating on Q&M Dental with an increased target price of 91 cents from 54 cents previously, as the research house forsees no material changes or threats to Q&M's market share in the private dental space in the medium term. It also likes that Q&M has continued to generate stable and resilient earnings.
Throughout the Covid-19 period, Q&M has proven itself to be resilient with its dental and medical services. It continues to be the bread and butter of the group, as its network of clinics dominate the private dental healthcare space.
Q&M currently owns the largest network of private dental outlets in Singapore with over 90 clinics and outlets island-wide and one Covid-19 testing laboratory newly incorporated in April 2020.
Q&M recorded $4.6 million in sales from its equipment and lab tests segment in 1QFY2021 (from $1.6 million in 1QFY2020), a significant part contributed from its investment in medical tech firm Acumen Diagnostics.
"Given the continued need for Covid-19 testing regardless of the availability of vaccines, we are confident on the outlook of Acumen Diagnostics in the short-medium term," says analyst Joel Ng.
Meanwhile, Q&M’s current overseas presence consists of 36 clinics in Malaysia and one clinic in China, bringing the overall total number of clinics as at end-March 2021 to 126, an increase of 8 clinics compared to end-2019.
For Q&M’s clinics in Malaysia and China, the situation was not as optimistic whereby there was a dip in y-o-y sales of 0.5% and 19% respectively for the FY2020 period. "However, we expect minimal impact on Q&M’s financial performance from China’s dip in sales and forecasts as it only accounts for 1% of total clinic revenue," says Ng.
On its Malaysia side, the decrease in sales was within the research house's expectations considering that the magnitude of Covid-19 impact such as lockdowns were much more severe compared to Singapore.
Moving forward, the group will continue to pursue organic growth in Malaysia by expanding their network of dental clinics, specifically in the Johor, Selangor, Malacca, and Klang Valley regions.
"Overall, Singapore continues to be the main revenue driver as a significant proportion of Q&M’s sales are generated by the local segment. With Q&M’s plans on expanding its network, we expect resilience in future years via gaining greater market share," says Ng.
"While 2020 performance was temporarily impacted by the pandemic, its acquisition of Acumen Diagnostics and expansion into medical technology (Covid-19 test kits) is expected to provide a boost to FY2021 and FY2022 earnings," he adds.
As at 3.30pm, shares in Q&M are trading at 70 cents or 4.2 times FY2021 book with a dividend yield of 4.9%.
