Q&M

Q&M: 3Q15 results came in line as net profit grew to $2.7m (+17% y/y), bringing 9M15 earnings to $9.3m (+84%), 74% of street’s full year estimates.

For the quarter, revenue of $30.6m (+7.6%) was boosted by the dental supplies manufacturing segment (+83%) due to the acquisition of Qinhuangdao Aidite in Aug ’14, as well as new contribution from six dental outlets acquired in Sep ’15 and Shenyang Aoxin in China. However, this was partially mitigated by lower sales from its distribution business (-35%) from the absence of a government contract in Malaysia.

From a change in sales mix, gross margin expanded to 82.9% (+1.4ppt).

Meanwhile, bottom line got boosted by other gains ($0.9m) mainly from a PIC cash payout, but partially mitigated by increased finance costs of $0.8m (+357%) due to accruals of interest payable relating to a medium term note issue.

Going forward, Q&M will continue to widen its network of dental clinics, currently at 65 outlets, in Singapore organically and through acquisition, to meet the rising demand for primary and higher value specialist dental healthcare services.

Malaysia remains one of the key markets where the group will look for future growth and acquisition opportunities. It current operates four dental clinics in Johor, one dental centre and two dental clinics in KL and one dental clinic in Malacca.

In China, Q&M continues to seek opportunities to acquire larger and established dental institutions and dental supplies manufacturers, to develop a new and sustainable growth pillar for long term value.

Maybank-KE maintains its Buy rating with TP of $0.97.