Perhaps many people have already noticed a fast growing dental healthcare group that has been sprouting island wide in the recent years. Not limiting to the 46 dental clinics, four dental centres and one mobile dental clinic located strategically across our sunny island, Q& M Dental Group (Singapore) has also expanded its footprint in the region to Malaysia and China.

Q& M’s founder and chief executive officer, Dr Ng Chin Siau, shared with Shares Investment in an exclusive interview that its successful growth in the region thus far has been nothing short of commendable in spite of the uncertain global economy outlook due to the resilient nature of its business as a pure dental play.

“Reflecting the resilience of our business, Q& M has shown progressive growth and a proven track record since its humble beginnings in 1996 having weathered the various troughs and crises the economy had faced,” Dr Ng said. Testimony to his words, Q& M had posted consistent growth in its top line pre-listing and recorded a compounded annual growth rate of 25.5 percent since its initial public offering in 2009.

Notably, Q& M also reported a 23 percent jump in revenue of $13 million for its first quarter ended 31 March 2012 from $10.6 million in the previous corresponding quarter on the back of higher contribution from its existing and new dental outlets in the region, including its dental equipment and supplies distribution business as well as a slight increase in services prices. Despite the margins squeeze from the rising expenditure costs such as manpower and rental, 1Q12 earnings increased 6 percent year-on-year from $1 million to $1.1 million.

A Solid Market Position
Standard & Poor’s noted that Singapore, where Q& M derives the bulk of its revenue, has a significant scope for growth in the dental health sector given the country’s rising affluence, increasing awareness of dental health and its reputation as a medical hub that has boosted a growing medical tourism market.

While a clear leader in the local private dental industry, Q& M is not resting on its laurels and is continuously building a larger customer base. By 2015, Q& M targets to have 60 dental outlets in Singapore.

“Having a wide network of dental outlets in Singapore makes us an ideal partner for corporate clients seeking a convenient healthcare programme for their employees,” Dr Ng said. Recently, Q& M signed a framework agreement with the National Taxi Association to provide affordable dental care to its 11,000 taxi drivers and their immediate family members. SIAS Research noted that assuming an average household size of 3.5, the potential patients from just this crowd is estimated to be 38,500.

“Particularly, the enhanced Community Health Assist Scheme (CHAS) introduced by the government, will be able to bring in even more patients for the dental group as it allows patients to seek subsidised treatment at private dental clinics,” Dr Ng pointed out. Highlighting the potential growth this has for Q& M, he remarked that about half of the workforce in Singapore is eligible under the scheme and all 50 outlets of Q& M, as well as its mobile clinic, are among the current 200 clinics accredited with the CHAS. This growing client base is indeed promising for Q& M, however, its continuous pursuit for growth does not end here.

Adding Growth Wings
Expanding upstream last year, Q& M has also ventured into the dental equipment and supplies distribution business with a focus in the dental healthcare sector. “The segment’s results jumped by a remarkable 579 percent in 1Q12, considering it is only in the second year of operation and has gained a market share of about 10 percent in Singapore,” Dr Ng proudly acclaimed.

Dr Ng shared enthusiastically that the segment will continue to add more product distributorships to its account and aspires to have its own dental laboratories and supply and manufacturing facilities in China going forward. Such a move will bring substantial cost savings as the company will have control over the value chain that would translate to a bottom line growth.

Although the bulk of Q& M’s operations and revenue currently comes from Singapore, Dr Ng opined that the main thrust of the company’s growth engine will come from the successful penetration into the China market.

“The investments Q& M has made in China promises a sustainable growth pillar that can yield a long term value due to the large untapped market potential from the huge population there,” Dr Ng commented. He went on to say that although only about 8 percent of the population in China visit the dentist once a year, the growing affluence of the people in China will see this figure increase in time.

“We are aiming to achieve a combined annual profit of Rmb80 million [$16 million] from China’s operations and plan for a potential listing in the China market in the next five years,” Dr Ng remarked. While noting the risks involved in expanding to China, he pointed out that the company has been laying its foundation over the past year in China and is optimistic on its developments, much as it appears challenging.

Currently, Q& M has already completed two collaboration deals with Aiyashi Dental Group and Dan-De Dental Group in China and has another five partnership deals that are in the midst of discussions.

The successful implementation of its array of expansion plans that are already rolling out would undoubtedly add more value to its shareholders. SIAS Research has maintained ‘Increase Exposure’ on the stock, on expectations that its newly-opened and underutilised clinics would perform better as business ramps up.

Building on its strong foundation as a pure dental play, the Q& M growth story is certainly one that we would turn our eyes on as it sets the stage for a stronger showing in the long term.