Q&M Dental Group (Singapore) Limited

Q&M Dental Group (Singapore) Limited (the "Company" or Q&M) is offering 74.075m shares at 27 Singapore cents. The offer is via placement only and the IPO will close on Nov 24 noon. Post IPO, the market cap is $74m . It is the first Dental pureplay to be listed on the mainboard of SGX and is one of the largest private dental healthcare group in Singapore.

Q&M plans to use close to 90% of IPO proceeds to fund new clinics and acqusitions.  It intends to make its foray into China first tier cities.  Revenue has grown from $24.3m in FY2006 to $29.6m in FY2008 and net profit has grown from $3.6m to $4.4m in the same period.  EPS for FY2008 is 1.6 cents based on the enlarged share cap and that represents 16.8x FY2009 earnings! Post IPO, the Company intends to distribute more than 50% of its net profit as dividend for 2H2009 and full year 2010. Assuming this year EPS is 1.6c (same as FY2008), the dividend payout will be 0.4 cents (2nd half only) and that translate into a yield of 3% (annualised) for FY2009.

The Company intends to expand aggressively ahead using the IPO proceeds and has injected a certain China play into this IPO and i guess that is what makes this IPO more 'interesting' than a pure Singapore dental play. As the IPO valuation is 'not cheap', investors will have to buy into the "story" that Q&M will be able to execute successfully in the fragmented China market. While the high "dividend" payout appears to be generous and attractive, it somewhat contradicts the cashflows needs of an "aggressive expansion plan".