As its name suggests, Q & M Dental Group (Singapore) Limited (SGX: QC7) is a healthcare group that specialises in dental health. The company has 71 dental outlets and 4 medical outlets in Singapore. It has also expanded regionally, establishing 14 dental clinics in Malaysia and one in China. Last month, the group released its earnings update for the second quarter of 2018.
Here are some of the key takeaways:
1. Total revenue remained flat at S$29.5 million. Excluding Aoxin, revenue from the Group’s dental and medical clinics increased by 2% to S$27.1 million, while equipment sales jumped 51% to S$1.6 million.
2. The higher revenue excluding Aoxin was due to better performance from existing outlets and revenue contribution from new outlets.
3. The group had a total of 86 dental outlets and four medical outlets at the end of the quarter. That is a slight increase from 83 dental outlets, four medical outlets and one aesthetic centre in the corresponding period last year.
4. Profit attributable to owners of the company, excluding one-off gains last year was 6% higher at S$4.55 million.
5. The group has adopted a dividend policy of paying at least 30% of the group’s core operating earnings, excluding share of associate profit and one time earnings.
6. Q&M Dental has proposed an interim dividend of 0.4 cent per ordinary share, 59% of core operating profits.
7. However, the group has a bit too much debt for my liking. As of 30 June, Q & M Dental Group had S$29 million in cash and borrowings of S$87 million, putting it in a net debt position of S$58 million. It had a net debt to equity ratio of 52%, which is on the high side, in my view.
8. That said, the group does generate consistent cash flow from its operations. In the reporting quarter, it generated S$1.7 million from operations and S$1.3 million in free cash flow.
9. On the company’s plans for the future, Dr Ng Chin Siau, Chief Executive Officer said,
“We are also actively searching for acquisitions of large and established dental institutions or dental supplies manufacturers in the PRC, that will provide stable and sustainable synergistic value for the Group and ultimately, increase long-term shareholders’ value.”
It also aims to add 10 dental clinics in Singapore and Malaysia each for 2018, with the eventual number dependent on opportunities and market conditions.
10. Shares of Q & M Dental Group trade at S$0.50 per piece, which translates to a price-to-earnings ratio of 25.3, price-to-book of 3.6 and an annualised dividend yield of 1.6%.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Jeremy Chia doesn't owns shares in any companies mentioned.