Excluding one-off items, 1HFY2025 core profit rose 5% y-o-y to $8.3 million, achieving some 45% of the full-year consensus forecasts.
“Notably, its dental business remained steady due to organic growth and strategic acquisitions as part of its local expansion plan,” says Ong in an Aug 15 note.
1HFY2025 revenue from the core dental business rose by 4% y-o-y to $87.2 million, mainly driven by the consolidation of Aoxin Q&M from being an equity-accounted associate to a subsidiary of the group, and higher revenue contribution from its equipment and supplies distribution companies in Singapore and Malaysia.
In particular, the consolidation of Aoxin Q&M as a subsidiary in June after Q&M’s mandatory general offer led to a $2.7 million revenue contribution from China for 1HFY2025, where there was none before.
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However, this revenue was offset by marginally lower income from its Singapore dental clinics, as well as less contribution from other businesses due to the closure of Q&M’s medical laboratory in September 2024 after its clinical laboratory service licence expired.
While Ong keeps “hold” on Q&M, preferring Raffles Medical within the local healthcare sector, he has raised his target price to 43 cents from 31 cents previously.
Meanwhile, Ong has a “buy” call on Raffles Medical with a target price of $1.13.
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Better 2HFY2025
Q&M’s interim dividend of 0.4 cents per share is unchanged y-o-y and represents a payout ratio of 98.4%. According to CGSI’s Tay Wee Kuang, this highlights the non-cash nature of the impairment, as core payout ratio would have remained at 45.9%.
Tay expects Q&M to report stronger core net profit h-o-h in 2HFY2025, “as its dental patients tend to utilise their corporate dental benefits towards the end of the calendar year”.
In addition, full contribution from Aoxin Q&M and EM2AI, as well as Q&M’s entry into separate sale and purchase agreements to acquire three clinics for $730,000, “should also provide incremental profit contribution in 2HFY2025”, says Tay.
In an Aug 16 note, Tay keeps “add” on Q&M with an unchanged target price of 49 cents.
‘New war chest’
In particular, Tay notes that Q&M raised $130 million in July by listing a bond with a 3.95% per annum coupon due 2028. “We believe [this] can accelerate Q&M’s plans to undertake strategic and value-accretive expansion opportunities, such as M&As, to grow its business in Singapore, Malaysia as well as China, where they have existing operations.”
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Maybank’s Ong provides more colour from management, saying Q&M aims to increase its network of clinics in Singapore through organic growth and strategic acquisitions that are earnings-accretive to the business.
“At the same time, Q&M is cognisant [that] the dental market in China is undergoing rapid consolidation. As such, Q&M is carefully evaluating opportunities to expand its dental business in China,” adds Ong.
Ong also notes that Q&M is “actively looking for opportunities” to expand its dental business, “possibly in the Johor-Singapore Special Economic Zone with the upcoming Rapid Transit System (RTS)”.
According to Ong, Q&M is considering “various strategies” to mitigate the potential outflow of patients to Johor, “who may seek to capitalise on the cheaper options across the causeway due to the currency exchange rate advantage, especially once the RTS becomes operational around December 2026”.
As at 4.10pm, shares in Q&M Dental are trading 1.5 cents higher, or 3.5% up, at 44 cents.
