Q&M Dental Group's share price has more than doubled since its IPO a month ago. Yes, more than doubled! IPO price was 27c on 26 Nov 09. Price closed at 56c today. >100% gain in slightly more than a month. Phenomenal!
I just looked on in disbelieve as the price kept forming new highs. Based on FA, the valuation is simply too rich compared to peers in the medical services sector in Singapore.
With an estimated diluted EPS of 1.6c per annum, the PE for Q&M Dental Group at 56c is about 35x! This is much higher than Parkway's 25x at $2.92 and Raffles Medical Group's 20x at $1.44 and these are large medical services providers! Compared to a peer closer to its size, Healthway Medical's PE at a price of 12.5c is only 10.4x!
Let's compare Q&M Dental Group with Healthway Medical, an undervalued counter in Singapore's medical services sector, in my opinion. Q&M Dental Group has more than 30 clinics islandwide but this is dwarfed by Healthway Medical's more than 80 clinics islandwide. In 3Q09, Q&M Dental Group's profit after tax went up 8.7% to $1.9m while revenue went up by 1% to $14m. Healthway's profit after tax went up 44.7% to $3.98m while revenue went up by 6.2% to $25.32m!
On 12 Dec 2009, shares of Q&M Dental Group were included for trade on the Freiverkehr in Germany. Perhaps, this has a large part to play in its current rich valuation. Fundamentally, that the share price is trading at a PE so much higher than Parkway and Raffles Medical Groups' is mind boggling. Will we see a correction or will Q&M Dental Group's share price continue to astound on the upside? Your guess is as good as mine but I'm not buying.
Healthway Medical: Growing a defensive business
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ReplyDeleteYep, Q&M is really defying fundamentals. Sometimes I get a sensing that SGX is listed with too many of these small companies. They are there for the capital but are they really global companies that can compete with their competitors in the global market or are they just a local company.
Sometimes, their share price is propped up because of over optimism and after a few years, the prices will come down. Think of Qian hu and Popular
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ReplyDeleteNever did own any Qian hu or Popular. However, I believe not all small caps are Dodos. The usual FA and TA stuff will apply. I like Healthway Medical. :)