The Edge Singapore has scored the stocks featured in this week’s Johor-Singapore Special Economic Zone (JS-SEZ) cover story based purely on quantitative metrics. The scoring table comprises 10 companies listed on the Singapore Exchange S68 (SGX) and Bursa Malaysia.
Similar to previous issues, the scoring table considers six aspects of the company.
- The first is historical performance, which looks at the company’s historical financials over the past 10 years, where discounts are given for poor performance and inconsistency.
- The second is profitability, which examines profitability ratios such as return on equity, return on assets and margins.
- The third aspect is yields and valuation, which compares the company’s fundamental yields against the risk-free rate, along with its relative valuation to peers.
- The fourth aspect is financial safety, which examines the company’s balance sheet, comprising liquidity and solvency ratios, the quality of its shareholder equity, and any external credit rating on the company.
- The fifth is sentiment, which looks at analyst ratings and forward price ratios of the company.
- The last aspect is the price-to-value ratio, which compares the price growth to the weighted value growth over multiple periods. This weighted value includes revenue, net income and cash flows in ascending order.
From Table 1, most companies appear to be slightly undervalued, with SGX-listed Genting Singapore G13 being the most undervalued. Genting Singapore’s principal activities are the development, management and operation of integrated resort destinations, including gaming, hospitality, leisure and entertainment facilities. Readers and investors who wish to invest in quantitatively undervalued companies should further examine the shortlisted stocks through qualitative analysis.
Q&M Dental Group is also undervalued. The company operates around 104 dental clinics in Singapore and 44 in Malaysia, with 16 of the 44 in Johor. Anecdotal evidence shows that Singapore residents often make a beeline to Johor for dental work, due mainly to lower costs.
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Outside of Singapore and Malaysia, Q&M is a substantial shareholder of Catalist-listed Aoxin Q&M 1D4 Dental Group, which operates dental clinics and hospitals primarily in the northeastern region of mainland China.
In 2020, the group expanded into the medical laboratories and research industry with a strategic investment in Acumen Diagnostics. Acumen is one of the few licensed medical laboratories for Covid-19 diagnostics in Singapore. The diagnostic laboratory is currently focused on commercialising its panel of PCR-based diagnostic testing for conditions such as sepsis, human papillomavirus (HPV) and colon cancer for private sector clinics and hospitals in Singapore. In addition, Acumen is running the Joint Testing and Vaccination Centre.
Separately, EM2AI, an associate of the group that focuses on developing AI-powered solutions, has rolled out a cloud-based Integrated Dental Management System that efficiently facilitates patient relation management and operational processes in the clinic. A Q&M Patient App integrated with EM2Clinic, which stores records such as the patient’s X-rays and 3D intra-oral scanned images, has been launched. EM2AI has also successfully deployed its AI detection module throughout the group’s dental clinics in Singapore and Malaysia.
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In FY2023 ended December 2023, Q&M reported a net profit $11.07 million, down marginally y-o-y. Based on the quantitative scoring table, Q&M is undervalued as its yields are attractive relative to the risk-free rate. The company also trades at a discount to its peers, such as a 44%, 20% and 12% discount for P/E, EV/Ebit and P/B respectively compared to regional peers in developed Asia Pacific.
Further, Q&M scored highly for its price-tovalue ratio where the growth in its weighted value exceeded the growth in stock price over a one-, three-, five- and 10-year period. Analysts also have a target price of over 30% its current trading price, with two “buy” calls, no “hold” calls, and “no sell” calls for recommendations updated this year.
Disclaimer: This article is for information purposes only and does not constitute a recommendation, solicitation or expression of views to influence readers to buy or sell stocks, including those mentioned herein. This article does not take into account the investor’s financial situation, investment objectives, investment horizon, risk profile, risk tolerance and preferences. Any personal investments should be done at the investor’s own discretion and or after consulting licensed investment professionals at their own risk.
