On the result front, Chong sees Q&M’s reported profit for FY2025 was mainly distorted by “accounting noise”.
“FY2025 PATMI fell 35% y-o-y to $9.3 million, but this mainly reflected consolidation-related losses and financing-related charges. Profit excluding other gains/losses and MTN and PSP expenses were broadly flat at $17.0 million,” Chong says.
On the M&A front, Chong explains that Q&M’s regional pipelines are now more concrete given active M&A progress across Australia, Thailand, Singapore and China.
“The proposed Australian platform alone would add more than 40 clinics and 120 dentists, while the broader pipeline suggests FY2026 could mark the start of a more visible regional build-out,” Chong predicts.
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As such, Chong is reiterating “outperform” and raises Q&M’s 12 month target price to 65 cents. He is keeping the terminal growth at 2% while raising the WACC to 8% from the previous 6.6%, reflecting a more conservative cost of capital framework around deployment risk and terminal value sensitivity.
On the other hand, Tay Wee Kuang of CGS International, in his March 13 report, believes that the completion of the potential M&A marks a significant milestone for Q&M as it allows the dental group to expand into two new geographies (Australia and Thailand).
“In addition, the acquirers have provided Q&M with a profit guarantee of 5-8 years, with key personnel of the various MOU entering a 15-year service agreement with Q&M that we believe paves the way for sustainability of earnings growth upon completion of the acquisitions,” Tay adds.
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Meanwhile, the analyst mentions that due to the non-binding nature of the MOU while Q&M undertakes due diligence on the acquirers as well as uncertainty over the potential completion date of the respective acquisitions, he has not reflected the potential EPS impact in his forecasts.
“However, we reduce our FY2026 and FY2027 EPS by 34.9% and 39.7% respectively due to recurring higher finance costs from Q&M’s $130 million MTN issuance last July to support its M&A plans,” Tay explains.
Hence, Tay is reiterating his “add” call on Q&M with a higher target price of 68 cents, which takes into account a 126.7% premium over his target of FY2027 PE ratio of 20 times for the potential impact of its M&A plans.
As at 4.42pm, shares in Q&M are trading 1 cent higher or 1.89% up at 54 cents.
