Q&M

Q&M: Maybank-KE visited Q&M’s operations in Liaoning Province, and was broadly impressed by the scale and standards of operations. Visited places include Aoxin’s three hospitals, the Liaoning Medical University Stomatology Hospital No. 2, and Aidite’s manufacturing facilities.

The house now expects greater contributions from Aidite as it aims to add two new production lines when its new facility is competed in Oct ’15 to meet overwhelming demand.

Maybank-KE also thinks Aoxin has further room for growth, especially in the mid-term, because two of its three hospitals are new.

The house also understands that Aoxin intends to replicate Q&M’s Singapore model of expanding through acquisitions internally. It will turn its attention to the privatisation of public hospitals as this segment offers substantial growth potential

The house raises FY16E-17E EPS by 3% to factor-in Aidite’s stronger growth, but reduces FY15E EPS by 9% for a three month delay in the completion of its four Singapore acquisitions.

Nearer term, the house expects 2Q15 core earnings to be lower q/q at $2.2m due to interest cost from the MTN, but

Looking at results, the house expects 2Q15 core earnings to be 24.1% lower q/q at $2.2m, due to MTN interest costs, but could surge 80% y/y due to Aoxin’s and Aidite’s contributions. 4Q15 will be a catchup quarter.

The house maintains Buy, and increases TP to $1.05 from $1.02.