What’s New
Q&M announced yesterday that well-known prosthodontist Dr Foo Mooh Thong will sell his practice at Paragon Shopping Centre in Singapore to Q&M for SGD5.5m in shares (to be issued at SGD0.365) and join the company thereafter. This values Foo & Associates at 10.5x P/E. Also, Q&M said that it is a step closer to completing the acquisition of Qinhuangdao Aidite High-Technical Ceramics in China. The latter will open the door to a new business in computer-aided design and milling of ceramic dental prosthetics.
What’s Our View
The complementary nature of Dr Foo’s expertise and Aidite’s business makes the twin acquisitions a smart move in our view. Q&M will not only get a profitable practice, but also gain an
expert (Dr Foo) in computer-aided design and milling of dental prosthetics such as crowns, bridges and veneers. As for Aidite, it is one of China’s largest makers of zirconium ceramic blanks, ideal for making dental prosthetics. Profit guarantees aside, we expect Dr Foo to be able to spearhead Q&M’s expansion of its dental business into the supply of dental prosthetics and enhance this revenue stream. We believe the longer-term impact of this union should far outweigh the short-term positive contribution of Dr Foo.
The combination of Aidite and Dr Foo would add SGD0.01 to our target price, nudging it up to SGD0.49. Dr Foo will sign a 10-year service agreement and give a profit guarantee of SGD0.5m pa in return for Q&M shares at a 10% discount. We will factor the deals into our forecasts and TP when completed. Maintain BUY on Q&M.
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