Mainboard listed Q & M Dental Group (Singapore) Limited (“Q & M”) announced on 23rd October 2024, that they have entered into a non-binding Memorandum of Understanding (MOU) with certain shareholders of Guangdong Delun Medical Group Co., Ltd. (“Delun”).
This MOU signals Q & M’s intent to acquire a 25% stake in Delun, a key provider of dental healthcare services in South China.
Mr Tay Wee Kuang, an analyst from CGS International, issued a research note on 24 October 2024, reiterating “an "Add" call with a target price of S$0.37, unchanged pending a definitive agreement. He noted that the acquisition could contribute an estimated RMB18.4 million (~S$3.4 million) annually to Q & M’s earnings.
Additionally, the earnings risk of the deal is likely to be mitigated by potential profit guarantee terms, as seen in past transactions by Q & M.
While the discussions are still in early stages, Delun could become a significant contributor to Q & M’s profitability.
Furthermore, the target price is based on a valuation of 20x FY25F P/E, with potential re-rating catalysts, including the finalisation of the acquisition and improved performance from Aoxin Q & M.”
Photo: Delun website
This potential deal comes at a time when the Chinese dental market is forecasted to grow to US$ 11.52 billion by 2030, presenting a major opportunity for Q & M to strengthen its presence in the South China region.
Delun is known for its specialised dental services, which include orthodontics, dental implants, beauty crowns, porcelain veneers, and other oral health treatments. The company operates 1 dental hospital and 28 directly managed outpatient clinics, covering over 35,000 square metres, and houses more than 400 dental chairs, positioning Delun as one of the largest dental chains in the region.
The MOU, while significant, is not legally binding, and the final terms of the investment will be subject to further negotiation. Q & M Dental Group will now undertake due diligence on Delun, evaluating the financial, legal, and operational aspects of the investment before negotiating a definitive agreement.
This proposed investment forms part of Q & M’s strategy to expand its dental business in Southern China. The board confirmed that none of its directors or controlling shareholders have any personal interests in the investment, aside from their existing shareholdings in the company.
Q & M advised shareholders to exercise caution when trading shares. Further announcements will be made as material developments occur, including the signing of any definitive agreements.
*Note: This article does not constitute financial product advice. You should consider obtaining independent and professional advice before making any financial decision.
To keep these insights at your fingertips, subscribe and share our update
