Dr Ng Chin Siau, CEO of Q&M Dental Group. NextInsight file photo

THROUGH ITS two 100%-owned subsidiaries in China, Q & M Dental Group (Singapore) Ltd (全民牙医集团(新加坡) 有限公司) has sealed a non-binding MOU with Chinese private equity firm Kunwu Jiuding Capital Co Ltd.

Under the MOU, entered into today, Kunwu Jiuding Capital will invest RMB 192 million-240 million for up to a 20% equity stake in Shanghai Q & M Investment Management and Consulting Co Ltd (SQM).

The MOU was entered into between Q & M Dental Holdings (China) Pte Ltd, SQM and Kunwu Jiuding Capital.

Interestingly, the implied valuation of SQM is about RMB1.1 billion, which is equivalent to the market cap of the parent itself, Q&M Dental Group, which is listed on the Singapore Exchange.

Headquartered in Beijing, Kunwu Jiuding Capital is a leading Chinese private equity investment company with more than 50 branches and agencies across China.

With the deal, Q & M has become the first Singapore-listed healthcare company to receive funding from a Chinese private equity firm at the subsidiary level.

The injection of funds in renminbi denomination will support Q & M’s expansion plans in the People’s Republic of China, where QDHC and SQM are eyeing to acquire various dental clinics, hospitals and laboratories.

In addition, Q & M stands to benefit from Kunwu Jiuding Capital’s professionalism and strong local knowledge to support Q & M’s expansion plans.

Commenting on the proposed strategic investment, Q & M’s Founder and Group CEO Dr Ng Chin Siau said: “I’m pleased that Q & M is partnering with a leading Chinese private investment firm whose substantial resources and expertise will enable Q & M to continue with our long-term growth plans and to deliver compelling value to our shareholders.”

Chen Yi, Project Director at Kunwu Jiuding Capital said: “We are excited about this opportunity to invest in Q & M, a leading private dental healthcare provider from Singapore. We look forward to partnering with this talented management team to continue developing an attractive platform for expansion.”

Q&M stock price chart.

Q& M Dental Group (Singapore) Ltd, the largest private dental organisation in Singapore, posted a year-on-year increase of 17% in revenue to $13 million for the three months ended 30 June 2012.

New dental outlets in Singapore contributed $1.1 million to the revenue, while existing dental outlets in Singapore and Malaysia contributed an incremental increased revenue of $0.8 million.

The second source of revenue contribution to Q & M came from the dental equipment and supplies distribution business.

This business unit saw revenue rise to $0.5 million from $0.1 million in 2Q11, mainly due to the inclusion of dental equipment distribution revenue contribution for a full quarter in 2Q12.

As at the end of 2Q12, Q & M had a total of 47 dental clinics, four dental centres and one mobile dental clinic in operation, compared to 41 clinics, two dental centres and one mobile dental clinic at the end of June 2011 in Singapore.

Q & M’s net profit for 2Q12 was $1.1 million, down y-o-y owing to certain start-up costs of newly opened dental clinics and centres.

The Board of Directors has declared an interim dividend of 0.30 cents.

Dr Ng Chin Siau, Founder and Group Chief Executive Officer of Q & M, commented: “Our performance this quarter reflects the balancing act that we are undertaking when Q & M is undergoing an expansionary mode. Ultimately, the ability of companies in our sector to succeed will be determined by how successful they are in accessing growth markets and delivering valuable services on a sustainable basis.”

In 1H2012, revenue from dental clinics gained 18% to $25.5 million.

The positive revenue contributor came from the network expansion of dental outlets and an increase in revenue from existing clinics in Singapore.

Meanwhile, revenue from the dental equipment and supplies distribution business rose to $1 million in 1H12 from $0.2 million in the corresponding period last year, thanks to the acquisition of the dental equipment distribution company in June 2011.

For 1H12, profit after tax was $2.2 million compared with $2.4 million for 1H11.

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#3 Bernice 2012-08-14 14:29
Q&M Dental Group (Q&M) is currently trading at a valuation of 45.8x 2011 PE and 25.3x 2012F PE vs consensus earnings growth of 13.0%. On current year PE, it looks ok. This is the kind of PE for defensive healthcare stocks. Just look at IHH which is much higher. That's what the market loves.
#2 Ah Ho 2012-08-14 14:26
Melvin, the PE does look high -- everybody knows it and yet the stock price doesnt get depressed. Neither does it go up further.... This is some kind of tug of war between the value investors and The Rest.

When it comes to valuation, it can be pretty subjective. Interestingly, from a private equity point of view, read this sentence from the article "the implied valuation of SQM is about RMB1.1 billion, which is equivalent to the market cap of the parent itself, Q&M Dental Group, which is listed on the Singapore Exchange."
#1 Melvin 2012-08-13 18:17
Q & M is a good company,no doubts, but very over-rated for the time being.

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