Q&M: (S$0.71) Capturing greater value in China
Q&M’s 60% owned Shenyang Quanxin, is acquiring a 60% stake in Chinese dental distributor Shenyang Lan Hai for Rmb7.6m.
Maybank-KE views that the move is positive, given that the effective 36% stake allows the group to capture greater value in China's dental industry via a vertical expansion.
The house believes that together with Q&M's distribution business in Singapore and Malaysia- both of which have strong expertise in European products, the new arm now boosts the group's capabilities in China and allow cross-selling opportunities across the regions.
The earnings accretive deal was priced at 9x P/E compared to Q&M's 31x, and also comes with a profit guarantee of Rmb0.5m ($0.1m) each year.
Maybank-KE maintains its Buy rating but reduced its TP to $0.97 after trimming EPS by 1-3% in FY15-FY17, due to a slight change in profit guarantee conditions for an ongoing acquisition.
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