Q&M Dental Group - CGS-CIMB Research 2022-10-12: Tender Win Alleviates Short-Term Pressure

Q&M Dental Group - Tender Win Alleviates Short-Term Pressure

  • Q&M Dental (SGX:QC7) estimates a revenue contribution of S$3.6m from the operation of the Joint Testing & Vaccination Center (JTVC), which will commence on 2022-11-21 – See Q&M Dental's Announcements dated 2022-10-11.
  • We have yet to incorporate the potential earnings impact as the contribution is less significant compared to an estimated contribution in excess of ~S$30m in FY21 from its COVID-19 testing operations.
  • Nevertheless, we believe that the tender will alleviate Acumen’s short-term woes in commercialising other diagnostic tests given Q&M Dental’s 2Q22 disclosures suggested Acumen recorded ~S$170k in net losses, likely due to the drastic reduction in polymerase chain reaction (PCR) testing for COVID-19 in Singapore during 2Q22.
  • From our understanding, Q&M Dental has since streamlined Acumen’s operations to manage costs while retaining its diagnostics capabilities. The tender could lift Acumen back to profitability and present Q&M Dental with an opportunity to expand its offerings to include vaccination services in the future.
  • We are expecting Q&M Dental to report revenue/net profit of ~S$45m/c.S$4.5m in 3Q22. This implies 22%/68% declines y-o-y due to the peak of COVID-19 contributions resulting in a high base in 3Q21. Stripping off COVID-19-related contributions, revenue run rate was likely comparable both y-o-y and q-o-q, which we believe exhibits the resilience of Q&M Dental’s dental core business.
  • Latest data from the MOH also showed that monthly dental visits in July reached more than 82k. Q&M Dental’s cost profile is also likely to improve given that employee bonuses, previously recognised only in the 4th quarter in prior years, were accrued for in 2Q22.
  • Upgrade Q&M Dental from Hold to ADD with unchanged target price of S$0.44 pegged to 20x FY23F P/E, 1 standard deviation below Q&M Dental’s 5-year historical mean.
  • The current Q&M Dental's Share Price represents a forward P/E of 15x, close to 2 standard deviation below its 5-year historical mean and near its all-time low of 13.7x. We believe valuations have turned attractive for Q&M Dental.

Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @ https://www.itradecimb.com.sg/.

TAY Wee Kuang CGS-CIMB Research | Kenneth TAN CGS-CIMB Research | https://www.cgs-cimb.com 2022-10-12

Read also CGS-CIMB's most recent report:
2022-11-14 Q&M Dental Group - Dental Core Revenue Growth Commendable.

Price targets by 2 other brokers at Q&M Dental Target Prices.
Listing of research reports at Q&M Dental Analyst Reports.

Relevant links:
Q&M Dental Share Price History,
Q&M Dental Announcements,
Q&M Dental Dividends & Corporate Actions,
Q&M Dental News Articles

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