“The application follows three consecutive years of improvement in its underlying operating performance, with underlying profit before tax increasing from about RMB2.7 million in FY2023 to RMB7.7 million in FY2024 and RMB8.4 million in FY2025,” Tang states.
The analyst believes that if approved, Aoxin Q&M will be able to see enhancement to its corporate profile and increase visibility among a broader base of institutional and international investors.
“Overall, the proposed transfer represents a positive strategic development that is likely to reinforce investor confidence and position Aoxin Q&M for sustainable growth going forward,” adds Tang.
Apart from the proposed transfer of listing status, earlier this year, Aoxin Q&M announced its expansion into China through two non-binding MOUs to acquire separate dental groups in Central and Southern China, with the second announcement providing more detailed terms for the Southern China deal.
See also: Keppel DC REIT is JP Morgan’s preferred data centre play in Singapore
“Both deals include long-term profit guarantees and remain subject to due diligence and definitive agreements. If completed, the acquisitions would expand its network by around 45 clinics and 140 dentists, bringing the total number of clinics to around 59, strengthening its China footprint and supporting its strategy as Q&M Dental’s dedicated China platform, although completion is not guaranteed,” Tang elaborates.
Tang also pointed out that Aoxin Q&M’s unique acquisition model utilises the Sino-Foreign Equity Joint Ventures (EJV) and strategic partnerships to scale up operations efficiently.
“By funding acquisitions through a combination of cash and new share issuances, it preserves liquidity while ensuring that incoming partners are co-owners with skin in the game, reducing integration risk and aligning incentives from the start,” says Tang.
See also: CGSI, citing subdued job market, maintains 'hold' call on HRnetGroup
As such, he is keeping his “buy” recommendation with unchanged target price of 36 cents on Aoxin Q&M, which represents a 44% upside. “Our target price is pegged to 52.5 times FY2027 P/E ratio, which is +2.5 standard deviation above historical averages based on its parent company’s (Q&M Dental Group) P/E band. Our valuation peg aims to capture more potential upside from more acquisitions by Aoxin Q&M in the China dental market,” Tang concludes.
Shares of Aoxin Q&M closed 2 cents higher, or 8.7% up at 25 cents on July 9.
