Recent Q&M Dental Share Price Weakness Creates Buying Opportunity

• Q&M Dental's share price 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 (see Q&M Dental's corporate actions), our target price for Q&M Dental (SGX:QC7) has been adjusted to S$0.85, still pegged at 22x FY22E P/E (~20% discount to peers’ average). With 49% upside potential, maintain BUY.

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.

Increases Frequency/coverage of Mandatory Tests

• In fact, Singapore is increasing the frequency of COVID-19 malls and supermarkets as well as delivery personnel and transport workers.

Q&M Is on Track to Deliver Strong 2H21 Earnings

• Going forward, Q&M Dental also wants to widen as swabbing and vaccination.

• For FY21E, we estimate about S$10m earnings contribution for its 51% share of testing business (1H21: ~S$4m). Meanwhile, dental outlet expansion is on track as Q&M Dental had added 10 new clinics year-to-date in Singapore and is targeting to open another 10 by 4Q21.

Source: Maybank Kim Eng Research - 14 Sep 2021