Q&M Dental

Q&M Dental: Announced a 1-for-5 rights issue to raise $14.1m via the issuance of 140.5m new shares at $0.10/rights share. Major shareholders have agreed to take up their rights entitlements and subscribe for any excess rights shares (up to 61.5m or 43-50% of the total rights shares). The rights issue price is pretty attractive given the stock’s outperformance and the expected positive contributions from Q&M’s China acquisitions, while the major shareholders’ decision to fully subscribe for their allotments is also a strong endorsement of the stock. The funds raised is also expected to be used to complete the acquisitions of Aoxin and Aidite. While Kim Eng expects some near-term earnings dilution, this will be compensated by maiden contributions from its six proposed acquisitions. Overall, the house would remain buyers of Q&M as the full year impact from the acquisitions will be felt only in FY15E, while not ruling out more EPS-accretive acquisitions in the future.