Q&M Dental Group (Singapore) is set to unveil an artificial intelligence (AI) “dentist” to resume its growth trajectory which was started by the Covid-19 pandemic but has now stalled. Q&M has set up subsidiary EM2AI to create an AI platform to prevent misdiagnoses and provide a transparent treatment plan for patients.
Dr Ng Chin Siau, CEO and founder of Q&M, says the platform would eliminate the problem of dentists preferring certain procedures and treatments over others because of higher revenue or personal bias. Apart from suggesting a treatment plan favourable to the patient, the AI platform also helps dentists to capture all the data about the condition of a patient’s teeth in a minute or less after an X-ray is taken.
Typically, depending on the condition of the patient’s teeth and limited to what the dentist can see with his naked eye, this diagnostic process takes several minutes and the data has to be manually entered into a chart for filing.
Currently, Q&M has 102 dental clinics in Singapore, 45 in Malaysia and one in China. Q&M expects the AI business to overtake its current core dental business as there is only so much more the company can grow through the opening of new clinics in Singapore.
Q&M CFO Melanie Ng says the company is ready to launch the AI platform but is waiting approval from the Health Sciences Authority (HSA). The company will initially roll out the AI platform in its own clinics before introducing it to others.
Q&M aims to capture just about 10% to 15% of the market in Southeast Asia and China with the platform. “The Southeast Asian and Chinese markets have a total population of over 2 billion. For now, we are only targeting about 10% to 15% of that market, which is about 30 million people. This is the future of Q&M. This AI platform is quick to market and easier [than opening new clinics] to reach the dental clinics and patients in the regions we are looking at. This could go global and disrupt the way dental services are provided today,” says Ng.
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Melanie adds: “We currently have a team of 50 people working on this and we are burning cash to do this, which is why we had to set aside a lot of cash for this project and the recent 1QFY2022 dividend was less than the previous year.”
To recap, Q&M has declared a first interim dividend of 0.4 cents per share in 1QFY2022 ended March, compared to 1.0 cents in the same period a year ago. This came on the back of a 31% y-o-y decline in earnings to $6.5 million and a 7% growth in revenue to $46.8 million.
‘Unexceptional’ FY2021
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Singapore entered the “circuit breaker” in April 2021 to cut the rapid spread of Covid-19 within the community which was still largely unvaccinated. In October 2021, Q&M acquired medical technology company Acumen Diagnostics, a local manufacturer of polymerase chain reaction (PCR) Covid-19 test kits.
Acumen helped Q&M achieve record earnings despite the pandemic. In FY2021 ended December 2021, Q&M reported earnings of $30.5 million, up 55% y-o-y, with revenue up 49% y-o-y to $205.6 million.
When panic-selling hit global markets back in March 2020 when Covid-19 first struck in Wuhan, China, Q&M’s share price was 31 cents. When investors started to appreciate how the company was actually benefitting from the pandemic, it shot up to as high as 71 cents last August although it has since eased off to close at 46 cents on July 5, valuing the company at $439.5 million.
Given Singapore is in the endemic phase when testing needs are significantly lower, Q&M Dental does not expect a repeat performance. “We won’t be able to replicate the Covid results for FY2022. The past two years have been a bonus. But this is not the end for Acumen,” says Melanie in an interview with The Edge Singapore. She says it is also an excellent opportunity for Aoxin to enhance its corporate profile and expand its business as Aoxin has acquired a 49% stake in Acumen from parent Q&M last October.
Alternative plans for Acumen
What about Acumen whose business is expected to slow down in a post-Covid world? Melanie, who took on the role of CFO in May and is CEO Ng’s sister, says. “We are developing non-Covid test kits that are required in non-crisis situations but this may take some time to pick up.”
Some of Acumen’s non-Covid test kits include a patented test kit for sepsis, which has also received approval from HSA. While such kits of other brands are already in the market, Acumen will focus on increasing its market share.
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Meanwhile, Q&M had in January indicated plans to separately list Acumen on Nasdaq. Currently, Acumen is 51% owned by Q&M and 49% owned by Q&M’s Chinese dental business Aoxin Q&M which operates clinics and hospitals in China, bringing Q&M’s total ownership in Acumen to 67%. If the listing goes through, Acumen would be Q&M’s second spin-off, with Aoxin Q&M being the first spin-off which was listed on the Catalist Board of Singapore Exchange (SGX) in 2017.
Melanie says Nasdaq was chosen over SGX as it is a choice listing location for the tech, digital and biotech sectors. In addition, a Nasdaq listing provides Acumen with ready access to the world’s largest economy, an expanded investor base and additional sources of financing. It is also an excellent opportunity for Aoxin to enhance its corporate profile as it expands its business.
Plans for the core business
For Q&M’s core dental business, the reopening of the economy means the company is able to expand to foreign markets.
Says Melanie, “We are currently looking at other countries within the region like Cambodia and Indonesia, and we would like to revisit our expansion into Vietnam, which was put on hold due to the pandemic.”
“For these new markets, we have to do our due diligence and assess the market before opening up new clinics. What we have in mind is to use our AI platform to enter these markets and create partnerships with the locals. After some time doing that, we may decide to open clinics in the market through the partner that we work the best with,” she adds.
On the flip side, the reopening means Singaporeans can cross over to Malaysia for cheaper dental services. Melanie is not too concerned though, as Q&M has 17 dental clinics in Johor Bahru and a total of 45 in Malaysia. She believes that Singaporeans will likely choose Q&M if they intend to cross the border for cheaper dental services as it is a trusted brand.
At present, there are only about 1,881 dentists and 860 private dental clinics in Singapore, which translate to just one dentist to 2,300 people. As Q&M’s domestic target market is middle-class and has a 13% market share, the Ngs believe there is still much more room to grow.
“We want to serve the local market and be located where all the locals are. Our clinics are always located in high footfall areas and you cannot miss out big green tooth logo,” adds Melanie.
What analysts say
Despite not expecting a repeat of Q&M’s record FY2021 earnings, analysts are positive about the stock in FY2022. Both DBS Group Research and CGS-CIMB are keeping their “buy” and “add” ratings, respectively.
DBS analyst Paul Yong, however, has lowered his target price to 72 cents from 80 cents previously as he moderates his expectations for the Acumen business due to the fall in demand for PCR tests in Singapore.
“We remain positive on the primary healthcare segment as Q&M has a clear expansion strategy for the next 10 years and is aggressive in executing its plan. Q&M has been off to a good start with 14 new clinics opened in Singapore and four new clinics in Malaysia in FY2021 and we expect to see the fruits of organic growth in FY2022, with more to come in the next nine years,” says Yong.
Meanwhile, CGS-CIMB Research’s Tay Wee Kuang and Kenneth Tan have also lowered their target price to 73 cents from 79 cents, as 1QFY2022 revenue and net profit missed their expectations and the dividend cut has dampened sentiments.
“We believe the share price could stay subdued in the near term due to expectations of tapering Covid-19 testing contribution, a subpar dental core showing in the first quarter and an annualised dividend payout of 1.6 cents compared to 4.0 cents in FY2021,” say Tay and Tan.
Photo: The Edge Singapore/ Albert Chua
