7 things I learned from the 2018 Q&M Dental Group AGM

Q&M Dental Group Limited is a private dental healthcare service provider established in 1996. Starting from a single-chair dental clinic over twenty years ago, the group now has a total of 70 dental outlets and four medical outlets in Singapore, 14 dental outlets in Malaysia, and one dental outlet in China.

I attended Q&M Dental Group’s annual general meeting to find out more about the company’s past year performance and its outlook for the year ahead.

Here are seven things I learned from the 2018 Q&M Dental Group AGM.

1. Revenue decreased 20.3% from S$154.9 million in 2016 to S$123.5 million in 2017. The decrease is mainly due to the deconsolidation of Aoxin Q&M Dental Group from the accounts as the subsidiary was reclassified from a subsidiary to an associate of the group; Q&M spun off Aoxin which listed on the SGX Catalist board in April 2017. Aoxin is a provider of private dental services, and dental equipment and supplies in Liaoning province, China.

2. Profit before tax decreased by 31.0% from S$35.5 million in 2016 to S$24.4 million in 2017. However, profit attributable to owners increased 23% from S$11.4 million in 2016 to S$14.0 million in 2017 after excluding other gains and losses attributable to non-controlling interests, and expenses in relation to the spin-off of Aidite Qinhuangdao in 2016 and Aoxin in 2017. Q&M Dental Group currently owns 36% and 43% of Aidite and Aoxin respectively.

3. Q&M declared a final dividend of 0.42 cents per share and a special dividend of 0.50 cents per share for 2017. This brings its full-year dividend per share to 1.62 cents. Excluding the special dividend, this is in line with the 1.12 cents paid in 2016. Based on Q&M’s share price of 60 cents as at 25 April 2018, its expected dividend yield (excluding special dividends) is 1.9%.

4. CEO Dr Ng Chin Siau aims to grow the number of dental clinics in Singapore by 10 to 20 annually. With a 10% market share in terms of the number of dental clinics in Singapore, he believes that Q&M Dental Group has room to grow, organically or through acquisitions, to hit 40% market share in Singapore before facing any resistance from the Competition & Consumer Commission of Singapore. In addition to growth in Singapore, the CEO also plans to open 10 locations a year in Malaysia, and increase the number of clinics organically in China starting from Shenyang.

5. A shareholder questioned the approach of Q&M Dental Group’s organic growth strategy, since the company has done well so far growing through acquisitions. The CEO was quick to point out that, to date, only 11 out of 70 dental clinics were acquired. He highlighted that Q&M Dental Group’s strength has always been its organic growth. It is easier to build a dental practice from the ground up than integrating an acquisition that is culturally different, especially one with 30 to 40 years of history. For such acquisitions, Q&M usually provides both administrative and human resource support as well as the ability to bulk order supplies through the company’s network.

6. As a follow-up, a shareholder inquired about the management’s strategy to recruit dentists to meet the demand of Q&M’s expansion. COO Dr Raymond Ang said that Q&M has an edge over its competitors because of its competitive remuneration package and free in-house training. For example, graduate dentists working at the National Dental Centre will have to pay S$10,000 to take an implant course, while they can do it for free at Q&M.

7. A shareholder expressed concerns about the sudden surge in other financial liabilities from S$15.5 million in 2016 to S$60.5 million in 2017. The fourfold increase is mainly due to the reclassification of medium-term notes (MTNs) which mature on 18 March 2018 from non-current liabilities to current liabilities. CFO Sim Yu Xiong addressed the issue saying that Q&M has successfully refinanced the S$60.0 million MTNs with S$30 million three-year term loans from both OUB and OCBC.

Liked our analysis of this AGM? Click here to view a complete list of AGMs we’ve attended »

Kenny Quek is an equity investor and analyst at The Fifth Person. After reading the book The Warren Buffett Way in his teenage years, he became hooked on the idea of building wealth inactively, buying great businesses at the right price, and letting the power of compound interest work its magic. With that philosophy in mind, he established and managed a fund for a few years in the U.S. before coming back to Singapore. Kenny graduated from Drexel University in Philadelphia, PA with a major in finance.

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