• Q & M Dental can double its earnings upon completion of the acquisition of more than 70 dental clinics in Australia, Singapore and Thailand. The estimated value of the acquisitions is S$272mn, backed by five to eight-year profit guarantees totalling S$200mn.
• The acquisition will be satisfied by cash and shares. Using the Australia acquisition template, shares issued will be 40% of the purchase consideration at the issue price of S$0.70. There will be a 15-year moratorium on the shares and a 15-year service agreement to align the vendors&rsquo interests.  The acquisitions are pending financial and legal due diligence. The embedded earnings growth from profit guarantee is around 14% p.a. for next three years.
• We estimate the acquisition could boost FY26e EPS by 80% to 3.5 cents. Our fair value post acquisition (excluding amortisation of intangibles) is S$0.95. However, we apply a 50% discount on the earnings accretion from the pending completion of the acquisitions. Our target price is raised to S$0.71 (prev. S$0.545). We peg valuations at 25x PE FY26e, in-line with Singapore healthcare sector. Aoxin Q & M Dental is valued at market valuation. Q & M Dental is building a dental franchise across the Asia Pacific through acquisitions. We view the long tenure of the share moratorium, service agreement and profit guarantee as equivalent to a permanent partnership to grow and scale up a new franchise and platform.

 

Key Highlights

Three proposed acquisitions. After securing S$130mn 3.95% medium term notes (MTN) in July
2025, Q & M has announced a non-binding memorandum of understanding for three proposed
acquisitions (Figure 1). The acquisitions are pending financial, legal and operational due diligence.
The largest acquisition is Australia for A$144.5mn (~S$130mn) on 11 March, followed by
Singapore clinics on 4 March and Thailand on 15 October. We have assumed the valuations,
proportions, and pricing of shares to be issued for the Singapore and Thailand acquisition will be
similar to those in Australia. In the Australia acquisition, the Q & M shares issued to the vendor
are priced at S$0.70. Our assumed net profit contribution does not include an amortisation of
intangibles from the acquisition.

Operational benefits of the acquisition. The Australian dental target operates more than 40
clinics and 120 dentists. The aim is to aggressively grow the network towards 400 clinics over the
next five years, organically or through acquisition. Rolling up more Singapore clinics is part of Q &
M Dental&rsquo s objective to grow towards 300 dental clinics over the next five years. Q & M Dental&rsquo s
standalone clinic count is currently 110. Thailand has more than 30 clinics focused on cosmetic or
aesthetic dentistry. There will be opportunities for revenue and cost synergies, together with best
practices in marketing, advanced dentistry and operations. The wider network of clinics is also an
avenue to roll out EM2AI solutions.

FY25 earnings review. FY25 revenue exceeded our expectations at 105% with the consolidation
of Aoxin Q & M. Net profit was below at 68% due to the S$2.4mn interest expense from the
S$130mn MTN and S$2mn one-off cost from professional fees and moving costs. Including these
additional costs, adjusted PATMI was 90% of our estimates. Staff costs were higher than expected
due to additional incentive payments. Progress in the rollout of EM2AI has also been slower, with
friction in changing dentists&rsquo current processes and behaviour. Rather than undertake the long
sales cycles, a licensing model could be adopted. Additional government subsidies for restorative
dental procedures (crowns, dentures, root canals) rolled out in October have contributed to a 3%
boost to Singapore&rsquo s revenue in 2H25.

Maintain BUY with higher TP of S$0.71 (prev. S$0.545)