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11-01-2012, 08:43 PM
(This post was last modified: 11-01-2012, 08:54 PM by shanrui_91.)
While i do believe that healthcare stock may warrant a 20 PER due to their defensive and growth prospect, I do not think that any of them should be rated as high as 50+.
The 400,000 is the patient pool not number of patients they see in a year, it is number of people who has registered with them so far. 250000 is the actual number of patient visit last year(not number of patient). In Singapore, they have around 6% market share based on number of dental clinics.
Despite the fact that they have increased revenue by 33% from 2008 to 2010, profit increase is a mere 10%. While it may partly be due to the new clinic effect (depreciation), it does shows that it is being affected by law of marginal return and not enjoying economy of scale. This is rather expected as a clinic will at least need 2 dentist and a receptionist. Rapid expansion will also cause them to take up places of higher rental fee.
And i am absolutely not comfortable with Q&M expanding to China of all places. Recently, one of my friend is flying to China to do a root canal treatment as it is much cheaper there even after taking into account the return trip ticket. One of the reason why I have always believe that dentist in fact earns more money per hour than a GP is because each year NUS Dentistry only takes in 50 students which is much lesser than that of Medical students and is the hardest faculty to get in. This is the case only for Singapore which try to limit the number of lawyer, doctor and dentist. The only competitive advantage that they have over the Chinese will be that they are from Singapore and offers a high safety standard. But the general population will still go for the much cheaper dentist(anyone can be one). Depending on the way they try to market it, margin will still be eroded. Before 2008, they enjoy a margin of 15% but this has drop to 10% since 2008.
I don't like how they try to expand so rapidly. It is possible for them to open another 50% more clinics, but that means that they have to find at least another 50 dentists (it has 45 clinics and on the conservative assumption that 1 clinic requires 2 dentists) which can easily be a yearly intake of dentists. As of 2008 of the 1442 dentist registered, only 1219 are in active pratice. How are they going to find more dentist other than by paying them more money?
The 400,000 is the patient pool not number of patients they see in a year, it is number of people who has registered with them so far. 250000 is the actual number of patient visit last year(not number of patient). In Singapore, they have around 6% market share based on number of dental clinics.
Despite the fact that they have increased revenue by 33% from 2008 to 2010, profit increase is a mere 10%. While it may partly be due to the new clinic effect (depreciation), it does shows that it is being affected by law of marginal return and not enjoying economy of scale. This is rather expected as a clinic will at least need 2 dentist and a receptionist. Rapid expansion will also cause them to take up places of higher rental fee.
And i am absolutely not comfortable with Q&M expanding to China of all places. Recently, one of my friend is flying to China to do a root canal treatment as it is much cheaper there even after taking into account the return trip ticket. One of the reason why I have always believe that dentist in fact earns more money per hour than a GP is because each year NUS Dentistry only takes in 50 students which is much lesser than that of Medical students and is the hardest faculty to get in. This is the case only for Singapore which try to limit the number of lawyer, doctor and dentist. The only competitive advantage that they have over the Chinese will be that they are from Singapore and offers a high safety standard. But the general population will still go for the much cheaper dentist(anyone can be one). Depending on the way they try to market it, margin will still be eroded. Before 2008, they enjoy a margin of 15% but this has drop to 10% since 2008.
I don't like how they try to expand so rapidly. It is possible for them to open another 50% more clinics, but that means that they have to find at least another 50 dentists (it has 45 clinics and on the conservative assumption that 1 clinic requires 2 dentists) which can easily be a yearly intake of dentists. As of 2008 of the 1442 dentist registered, only 1219 are in active pratice. How are they going to find more dentist other than by paying them more money?
get the counter to go down to it's actual PE value?!!