Q&M Dental: (S$0.725) No let up on acquisition spree
Q&M continues its acquisition spree, with a proposed 60% stake purchase in three dental clinics in Penang, Malaysia, for RM12.3m.
The consideration for Yong Dental, Smilebay Dental and Smilebay (BW) will be satisfied via cash (63%) and shares (37%), which will come under a 5-year moratorium lock-up.
Doctors of the three clinics have signed a 12-year full time service agreement and provided a 12-year profit guarantee of at least RM0.9m-RM1.5m per year.
Q&M currently trades at 27.9x consensus FY16 P/E. The street has three straight Buys on the counter, with an average 12-month TP of $0.98.
We do not rule out further coverage and visibility through Q&M's continued growth from acquisitions, and sparking a share price re-rating.
The group is currently in the midst of a potential spin-off of its China and Malaysian subsidiaries, which should provide access to an additional source of funding to capitalise on growth opportunities and increase the scale of its operations.
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