 Q & M Dental Group wants to establish a foothold in China's nascent market for prosthodontics (tooth restoration and replacement) with acquisitions that include a leading manufacturer of dental supplies and as well as a dental lab chain. Photo: Company
Q & M Dental Group’s M&A strategy has steadily lifted its earnings over the past four years: Net profit attributable to shareholders grew at a CAGR of 26% from FY2011 to FY2015 to S$11.4 million.
It is the largest vertically integrated dental chain in Singapore, with 68 dental clinics, 4 general practice medical clinics, one medical aesthetics centre and 2 dental supplies and equipment distribution companies as at 30 June 2016.
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Q & M Dental Group's 2QFY2016 briefing on 12 June 2016.
Photo by James Bywater
At Q & M’s recent investor briefing, its CEO, Dr Ng Chin Siau, CFO Vitters Sim and Legal Counsel Andrew Young provided insights into the synergistic strategy behind its four segments of growth:
- Dental services
- Manufacturing of dental supplies
- Dental laboratories
- Distribution of dental supplies and equipment
| ♦ Aesthetic alternative to metal and porcelain crowns | |||||||||||||||
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Aidite is a leading PRC manufacturer of zirconium oxide blocks, the key component material for computer aided design and computer aided manufacturing (CAD-CAM) of dental implants.
Compared to old-school mono-coloured crowns made of gold, silver or porcelain, crowns made of zirconium oxide blocks have the ideal translucency of 40% to 50% and stain flexibility for aesthetic similarity to human teeth.
“When we acquired Aidite, it was the second largest manufacturer of zirconium oxide blocks in China. Two years after the acquisition, it became the largest manufacturer because it was able to leverage on us,” said Dr Ng. |
| ♦ Dental labs to close supply chain gap | |
“Dental laboratories are vital to the dental service supply chain. They use scanned images of a patient’s dental profile to manufacture customised restorative prostheses such as crowns, bridges, dentures and dental implants,” said Mr Young. On 6 June 2016, the Group entered into a MOU to invest in a PRC dental prosthesis device solutions provider. The Group intends to acquire an effective interest of 33% in the dental laboratory businesses of Shenzhen New Perfect Dental Research (SZNP) for RMB 66 million. SZNP, a leading PRC dental lab group, operates 16 dental laboratories in 15 major PRC cities and employs about 650 dental laboratory technicians. Its products carry certifications for access to international markets, as follows:
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The Group recently announced that its 2QFY2016 revenue had increased year-on-year by 25.6% to S$38.3 million.
Revenue from dental and medical clinics increased 30% year-on-year to $29.3 million, thanks to increased contribution from existing and new dental outlets in Singapore and China.
"Every month in Singapore, we are seeing more than 6,000 new walk-in patients and more than 22,000 repeat customers," said Dr Ng.
Revenue from dental equipment and supplies distribution increased 81% to $3.9 million due to contribution from the acquisition of Shenyang Mao Tai Q & M Medical Equipment Leasing Co., Ltd. in PRC in January 2016.
Revenue from Aidite, the dental supplies manufacturing company, decreased 13% to $5.1 million as its operations had been interrupted by the relocation to its new factory in Qinhuangdao. The new factory has doubled the Group’s capacity to 5 production lines.
Net profit attributable to shareholders was flat at S$3.7 million. The Group is paying an interim dividend of 0.42 cents per share on 5 September for 1HFY2016.
For more information on its 1HFY2016 results, refer to its SGX announcement here.
