Q & M Dental

[dzwm87]

Hi RBM,

Do hope this investment will turn out well for you

Just out of curiosity, how do you arrive at S$1.10?

A quick glance at the company, it has been stellar since its IPO in 2010. One of the more significant catalyst in the past has been the investment made by IFC, a member of World Bank.

[RBM]

Thanks for your message dzdw87,

Whenever I go into any investment I commit to myself an exit price and I can not recall a case where I have not sold when the share price has materially surpassed my self-set exit mark (regretted it a couple of times!! - e.g. Royal Dutch Shell and Sun Hung Kai Properties, where I exited far too early). Usually I base the exit price on an analyst report Target Price (from one of the better analysts), sometimes with my own quite unscientific factor applied in addition, either reducing or raising the TP. Can't recall specifically what report my Q&M exit price was based on - I recall a SIAS analyst had a TP of S$ 1.00 but my thinking wasn't based on that one. I do not pretend to you that my exit price formulation is anything more than amateur.

I bought shares of Q&M in second half July 2011 - absolutely terrible timing on my part. But the price has now recovered and I am now even slightly ahead. My target exit price would correspond to a > 30% gain. If it takes years to achieve this I'll sit it out.

Two other things about Q&M ....... a) the dentists who own ~ 72% of the Company's shares have committed to retain their holdings until at least 2018 and to continue working for Q&M until that date, and b) I didn't like the IFC April 2011 deal and I have told Q&M that directly - it was a US$ 15 Million loan coupled with an IFC right - but not obligation - to convert 1/3rd of this (i.e. US$ 5 Million) into Q&M shares at a S$ 0.69 share price. Very good for IFC.

Vested,
RBM

Hi RBM,

Do hope this investment will turn out well for you

Just out of curiosity, how do you arrive at S$1.10?

A quick glance at the company, it has been stellar since its IPO in 2010. One of the more significant catalyst in the past has been the investment made by IFC, a member of World Bank.

[weijian]

If, repeat "if", I do achieve this ......... then I'll respond to weijian's 13th January "reality check" message enquiring about who has made money by investing in > 50 P/E stocks. While this response may therefore take some significant time, I believe that too often people are too focused or solely focused on P/E ratios alone. At Q&M's low point this year, Mr. Market gave it a share price corresponding to a P/E of 31.5 - it has gone up "a bit" since that "low point".

Mr. Market will decide. Lets take another look down the road.

Vested,
RBM

Hi RBM,
Many of us in this forum (including myself) are more value-oriented (buy decent companies at low P/E, buy excellent companies at fair P/E) rather than growth oriented (buy high P/E stocks, market darlings and have the P/E go higher-er)...All methods work, the devil is in the details (entry/exit points etc)

My comment was more from the POV of a 'value investor, who has disdain for over-priced stocks, and who also has a longer investment horizon with an ownership view of the company.

So, there is no punt intended with my previous comment and i hope i did not offend you.

I am waiting for the Market to humiliate me (once again)...

[Musicwhiz]

I bought shares of Q&M in second half July 2011 - absolutely terrible timing on my part. But the price has now recovered and I am now even slightly ahead. My target exit price would correspond to a > 30% gain. If it takes years to achieve this I'll sit it out.

Hi RBM,

Just a reminder regarding returns. Assuming your target % gain remains constant (i.e. >30% as you say), the time horizon matters a lot. If you achieve >30% gains in one year, that's amazing! But stretch the time period to say 5 years and it's about 6% per annum, which is decent but nothing to shout about. Assuming a longer time horizon of say 8 years, the gains will be eroded to merely about 3+% per annum, which means it would be better to put your money in an index fund.

So when you say you are willing to wait "years" to achieve this, just make sure it is a reasonable time frame. I think I learnt this concept from some of the value investors within this forum.

[RBM]

Thanks MW,

At my not-so-ripe age ........... even I understand the time value of money. But I am a little less ambitious in my return goals than most ........... so if it takes five years I'll be fine.

Lets see how this one plays out. Today Q&M closed at S$ 0.83. I'll bet anyone in very liquid currency that it gets to S$ 1.10 before it gets to S$ 0.60. By "very liquid" I mean the kind of "currency" you can buy at Harry's.

One of the great things about this forum is that forummers can bring ideas and experiences forward and no one abuses, mocks or insults you. Forummers offer different views but those differences add value and richness to the discussion and make for better decision making. No other investment forum in Singapore comes within a mile (or a P/E ratio) of this one. And I will miss your blogging MW....... very much so.

Take care,
RBM

I bought shares of Q&M in second half July 2011 - absolutely terrible timing on my part. But the price has now recovered and I am now even slightly ahead. My target exit price would correspond to a > 30% gain. If it takes years to achieve this I'll sit it out.

Hi RBM,

Just a reminder regarding returns. Assuming your target % gain remains constant (i.e. >30% as you say), the time horizon matters a lot. If you achieve >30% gains in one year, that's amazing! But stretch the time period to say 5 years and it's about 6% per annum, which is decent but nothing to shout about. Assuming a longer time horizon of say 8 years, the gains will be eroded to merely about 3+% per annum, which means it would be better to put your money in an index fund.

So when you say you are willing to wait "years" to achieve this, just make sure it is a reasonable time frame. I think I learnt this concept from some of the value investors within this forum.

[dydx]

I have taken a brief look into the just released FY11 (ended 31Dec11) results announcement....
http://info.sgx.com/webcoranncatth.nsf/V...10002772A/$file/FY2011_FinancialResults_27022012.pdf?openelement

Based on Q&M's latest 275.226m outstanding issued shares and the last done share price of $0.77, Mr Market is now attaching amarket value of approx. $212.0m on this well-established but still smallish medical service enterprise without its own hospital asset. I find Mr Market perhaps is overly enthusiastic and generous in this case.

For a business which generated only approx. $5.15m in FCF (after tax and before capex) in FY11 and growing at less than 10% yoy, Mr Market is now willing to pay close to 39.0x for it including some $11.6m in net cash reserve. Amazing!

[RBM]

My favourite listed dental company (is there another one??) announced its intention to pursue a share split - two for one - earlier today. I have added the first half of Q&M's announcement below (the remainder of the disclosure was about the implications for Q&M's Employee Option Scheme and their IFC Convertible).

As VB's have worked-out by now, I am a simple man with a (very) simple mind. To such a mind, if you do a two-for-one-split ........... then the share price simply halves? And Q&M will incur costs for an EGM etc.? In their SGX Disclosure below you will note that Q&M go on about improved liquidity and broadening the shareholder base - forgive me but isn't that all a load of tosh? (or " a load of Eratats", as I heard one less-charitable type say the other day!)

What am I missing here?? Does it really boost liquidity? Does it really attract the interest of little old ladies (and little old gents) with a few S$ to spare, who would otherwise not invest in the stock? I can't see it myself.

Vested - and I will soon have twice as many shares as I had before!!

+++++++++++++++++++++++++++++++++++
Q & M DENTAL GROUP (SINGAPORE) LIMITED
(Company Registration No. 200800507R)

Announcement

PROPOSED SHARE SPLIT OF EACH ORDINARY SHARE IN THE CAPITAL OF THE COMPANY INTO TWO (2) ORDINARY SHARES

1. INTRODUCTION

The Board of Directors (“Board”) of Q & M Dental Group (Singapore) Limited (the “Company”) wishes to announce that the Company is proposing a subdivision of the share capital of the Company in such a manner so that each ordinary share (“Share”) in the capital of the Company is split into two (2) ordinary shares (each a “Subdivided Share”) in the capital of the Company (“Proposed Share Split”).

As at the date of this announcement, the Company has an issued and paid-up share capital of S$22,947,641 divided into 275,226,497 issued Shares. The Company does not hold any treasury shares.

Following the implementation of the Proposed Share Split, the Company will have an issued and paid-up share capital of S$22,947,641 divided into 550,452,994 issued Subdivided Shares.
All Subdivided Shares arising from the Proposed Share Split shall rank pari passu with each other. The shareholders of the Company (“Shareholders”) are not required to make any payment to the Company in respect of the Proposed Share Split.

2. RATIONALE OF THE SHARE SPLIT

The Directors believe that the Proposed Share Split is beneficial to the Company and its Shareholders for the reasons set out below:-

(a) Increase market liquidity of the Shares
The Proposed Share Split may improve market liquidity of the Company’s Shares over time as the reduced price of each board lot will make the Shares more accessible to both existing and potential investors.

(b) Broaden the Shareholder base
With the increased number of lots available for trading purposes, the Proposed Share Split may also broaden the Shareholder base of the Company from the current number of approximately 1,105 Shareholders (as at the date of this announcement) by improving the accessibility of an investment in the Company to potential investors.

Shareholders should note, however, that there can be no assurance that the abovementioned can be achieved as a result of the Proposed Share Split, nor is there assurance that such a result can be sustained in the longer term. Shareholders should also note that there can be no assurance that the price of the Shares after the implementation of the Proposed Share Split would be equal to or higher than the theoretical Subdivided Share price of S$0.375 subsequent to the implementation of the Proposed Share Split (based on the last transacted Share price as of 2 March 2012 of S$0.755).
++++++++++++++++++++++++++++++++++++

[privi]

Bro rbm, been looking around for a forum who has investors talking about qnm for a very long time & I'm glad I found it here!!!

Do u think tat this move to split the shares is good for the company? I really hope it moves like fragrance hotel!! Minus the fact that qnm does not pay good dividend. Sometimes I wonder y the co dun pay more, they hold >70% of the co shares and the dividend goes back to them rite?? It will attract more investors this way rite??

[RBM]

Thank you for your posting on this thread Privi,

Somewhat cynically (and emotively) in retrospect, I explained my views on Q&M's proposed share split in my posting yesterday. Shows what I know .......... Q&M's share price has gone up since the announcement, including an increase of one tick today when most everything else on the SGX was going south! But I still do not see the logic of the share split, vis-a-vis value benefits to the shareholders.

I agree that Q&M's ~ 1.8% dividend yield is nothing to write home about. I doubt they have the cover to pay much more however (P/E is currently ~45). As dydx points out in a recent posting, free cash levels aren't great.

I look at this as a pure growth play, with some defensive tint to it (we don't stop getting our cavities filled during an economic downturn do we?) - Q&M is 100% focused on dentistry (other "medical/health stocks" on the SGX do not have this focus - they usually cross many medical dicsiplines, sometimes with little or no synergy). While last years growth was to my mind disappointing, I am a believer in Q&M's Chinese Growth and Chinese IPO stories - but this counter is for the long term - it ain't going to deliver major returns in the near term.

Vested,
RBM

Bro rbm, been looking around for a forum who has investors talking about qnm for a very long time & I'm glad I found it here!!!

Do u think tat this move to split the shares is good for the company? I really hope it moves like fragrance hotel!! Minus the fact that qnm does not pay good dividend. Sometimes I wonder y the co dun pay more, they hold >70% of the co shares and the dividend goes back to them rite?? It will attract more investors this way rite??

[FFNow]

Q & M Dental: Acquisition Of Clementi HDB Shop Unit For S$3.7 Million.

http://qandm.listedcompany.com/newsroom/...C7C3.1.pdf