Bearing fruits of organic growth
- Record full year net profit of S$30.5m missed our estimates by 20%, mainly due to Acumen business
- 4Q21 was 1 Sct, full year dividend at 4 Scts
- Cut FY22F/FY23F earnings by 17%/11%
- Maintain BUY with lower TP of S$0.72
Investment Thesis
Maintain BUY with lower TP of S$0.72, implying potential upside of 36%. We lower our FY22F/FY23F earnings forecasts for Q & M by 17%/11% as we moderate our expectations for the Acumen Diagnostics business due to the fall in demand for PCR tests in Singapore.
Focused on execution of core dental expansion plan. We remain positive on the primary healthcare segment as Q & M has a clear expansion strategy for the next 10 years and is aggressive in executing its plan. Q & M has been off to a good start with 14 new clinics opened in Singapore and 4 new clinics in Malaysia in FY21 and we expect to see the fruits of organic growth in FY22F, with more to come in the next 9 years.
Undemanding valuations; good time to BUY. Q & M is currently trading at 15.5x FY22F PE, which is c.1 SD below its five-year average, with an EPS CAGR of 12.8% over FY21-FY23F. It is also an attractive yield play with FY22F yield of 7.5%.
Valuation
Maintain BUY with lower TP of S$0.72 based on sum-of-parts valuation: 1) core dental business at 25x FY22F earnings (S$0.67 per share), 2) subsidiary Aoxin Q & M at market value (S$0.04), and 3) Acumen Diagnostics business at 5x (S$0.01).
Where we differ
We remain conservative as we await more concrete plans for the testing business.
Key Risks to Our View
Reopening of borders and execution risks.