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The New Normal

Recent price weakness creates buying opportunity

Q&M has pulled back by >20% from recent peak post its 2Q21 results on profit taking, along with general market weakness. Given no change in earnings outlook, we see the current share price as a good entry level and provides a window of opportunity for those investors that missed the previous rally. Following the completion of 1:5 bonus issue, our TP has been adjusted to SGD0.85, still pegged at 22x FY22E (c.20% discount to peers’ average). With 49% upside potential, maintain BUY.

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Covid-19 testing set to become the new norm

According to Minister Lawrence Wong, Singapore will stay in the current preparatory stage of its reopening, and will continue to rely on vaccination and testing to keep the Covid-19 situation under control amid a recent spike in infections. With about 85% of the population likely to be fully vaccinated by the end of Sep, Mr Wong said Singapore should aspire to be a nation of testing, where testing becomes a way of life in this endemic.

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Increases frequency/coverage of mandatory tests

In fact, Singapore is increasing the frequency of Covid-19 tests for workers in “high-risk” settings to once a week (instead of fortnightly) wef 13 Sep. With cases doubling every week, the country could see 1,000 daily cases
in two weeks or possibly 2,000 daily cases in a month. As such, the government will further expand the coverage of these mandatory tests to other sectors, including those in retail, malls and supermarkets as well as delivery personnel and transport workers.

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On track to deliver strong 2H21 earnings

Going forward, Q&M also wants to widen Acumen’s testing capabilities to include Antigen Rapid Test & Serology Test, as well as other services such as swabbing and vaccination. For FY21E, we estimate about SGD10m earnings contribution for its 51% share of testing business (1H21: ~SGD4m). Meanwhile, dental outlet expansion is on track as the Group had added 10 new clinics YTD in Singapore and is targeting to open another 10 by 4Q21.