SINGAPORE (May 25): Maybank Kim Eng maintains its “buy” rating for Q&M Dental Group and raising its price target to $1.05 price from 88 cents previously.
This is due to the removal of stock overhang on 23 May after a substantial shareholder, Heritas Helios Investments, allowed its option to subscribe for up to 63 million of the company’s shares to lapse.
“The latest development is positive for the stock as the potential overhang of new scrips in the market has weighed on share price,” says analyst John Cheong in a Tuesday report.
According to data by Bloomberg and Maybank Kim Eng on YTD share-price performance of healthcare companies (Jan to May 2016), Q&M was the second best performer, with 14% gain YTD, among the five companies assessed.
Maybank recently hosted Q&M for a non-deal roadshow (NDR) on 24 May. Cheong recounts that investors were “positive about Q&M’s growth plans in China and impressed with its accretive M&A track record”, while the company’s management disclosed that “its success in acquiring two major players in 2014 has attracted more potential targets”.
He adds that Q&M has been gaining traction in China since it acquired three small dental groups and a distributing company in January this year, increasing its dental outlet count there from four to nine within 1Q16.
“Despite focusing more in China, Q&M will continue to grow its core Singapore market. It is now looking at smaller acquisitions and organic growth as prior acquisitions have establish better economies of scale and bargaining power,” says Cheong.
As at 10:15am, Q&M shares are trading 0.63% higher at 80 cents.