Q&M

Q&M: (S$0.675) Laws of attraction; entry into Growth portfolio
Maybank-KE believes Q&M's leadership in Singapore's dental industry will be further cemented by its acquisition spree, as well as its growing base of well-known dental specialists.

Last week (28 Jan), Q&M proposed to acquire dental group Lee & Lee (Dental Surgeons) for $10m, with 51% cash and 49% shares, at 14x P/E.

As in past deals, the vendor will provide a 10-year profit guarantee, starting with $0.7m in 2016 or 4% of Q&M’s FY16E earnings.

Q&M will be paying with new shares issued at $0.72 each, an 11% premium to its last closing price, suggesting that the vendor sees long-term value in Q&M.

As Q&M builds up its track record of attracting good dental specialists to join its platform, Maybank-KE foresees more knocking on its door, paving the way for more deals.

The house reiterates its Buy rating and TP of $0.93, based on 42x FY16e P/E, which can be justified given the scarcity premium among healthcare stocks.

In view of its rapid growth profile and M&A expansion, Market Insight is including Q&M into its Growth portfolio.