Q&M

Q&M: Maybank-KE highlights that following two proposed rounds of acquisitions, costing $29m, Q&M still has a cash balance of $31m since issuing its $60m MTN in Mar ’15.

Assuming that half of the remaining cash hoard ($15.5m) is used for acquisitions, the group could acquire another $31m of assets, via a 50% cash and 50% new shares deal.

Based on recent acquisitions which were done at 12x forward P/E by the group, this could represent earnings per share (EPS) contribution of $2.6m, which could potentially raise Maybank-KE’s earnings per share estimates for FY16/17 by 11%/10% respectively. Alternatively, if the entire $31m is used for acquisitions, FY16 EPS will increase by 22%. The above scenarios would translate to a higher TP, ranging from $1.11 - 1.22.

Additionally, Q&M’s market share is still low in Singapore. Even after completing its four proposed acquisitions, the group’s market share by number of dentists is estimated to only climb to 13% from 10%, far behind its long-term target of 40%, capped by the Competitive Commission of Singapore.

In China, Q&M only owns three dental hospitals and four dental clinics, against a backdrop of about 10,000 dental outlets in the country, of which 1,000 are private.

Going forward, catalysts are expected to come from more acquisitions and Maybank-KE is maintaining its Buy call with TP of $1.00, based on 45x FY16 P/E.