Q&M Dental Group - Expansion Plan Delayed; Disappointing 1H22 Performance
Q&M Dental 1H22 Results highlights
- Q&M Dental Group (SGX:QC7)'s revenue fell 4% y-o-y to S$90.9m in 1H22 from S$94.6m in 1H21, mainly attributed to the 28% decline y-o-y in revenue from the medical laboratory and dental equipment & supplies segment.
- Employee benefits expense and depreciation of right-of-use assets increased 20% and 22% y-o-y respectively.
- Profit attributable to Q&M Dental's shareholders declined 45% y-o-y to S$9.9m in 1H22 from S$17.8m in 1H21, partially due to the one-off S$4.4m gain on disposal of Aidite in 1H21. Excluding the one-off gain, profit attributable to shareholders declined ~34% y-o-y.
- No dividend was declared for 2Q22 as Q&M Dental plans to conserve cash for corporate activities and future expansions and guides that they will be paying down bank loans in 3Q22 and 4Q22. (Q&M Dental's Dividend in 1Q22: 0.04 cents per share; Dividend in 2Q21: 1 cents per share).
Q&M Dental Earnings forecasts revision and recommendation
- We cut FY22F/23F earnings forecasts for Q&M Dental by ~30% to S$22.7m/S$26.0m to factor in
- lower projections for new clinic openings in Singapore to roughly 10 per year from 15;
- slower ramp up to profitability for the new clinics; and
- softer forecasts for the Acumen Diagnostics business as demand for COVID-19 testing drops significantly in Singapore.
- We revise Q&M Dental's dividend payout ratio to a conservative 50% for FY22F-24F from S$0.04 per share previously.
- We lower our target price for Q&M Dental to S$0.53 based on sum-of-the-parts (SOTP) as we roll forward to FY23F valuations, implying 20x FY23F P/E.
- Q&M Dental's valuations is fair for now at 18x FY23F P/E, ~0.5 standard deviation below its 5-year average. As our new forecasts assume it will take a few years for Q&M Dental’s bottom-line to reach FY20 levels, valuations seem aligned with its fundamentals currently.
- Downgrade Q&M Dental to HOLD from BUY.
- Where we differ: We remain conservative on the core dental business as we await the ramp up in profitability for the new clinics.
Above is the excerpt from report by DBS Group Research.
Clients of DBS may access the full report in PDF @ https://www.dbs.com/insightsdirect/.
Tabitha FOO DBS Group Research | Paul YONG DBS Research | https://www.dbs.com/insightsdirect/ 2022-08-15 2022-08-15
Previous report by DBS Research:
2021-07-27 Q&M Dental Group - Pandemic To Endemic Winner
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