Q&M Dental Group Regains Stake in Growth-Enabled EM2AI

CGS International | April 1, 2025

Acquiring EM2AI Back from Key Management Personnel

Q&M Dental Group (QNM) has announced the acquisition of the outstanding 51% stake in its 49%-owned associate, EM2AI (unlisted), which is engaged in digital solutions for dentistry, including artificial intelligence (AI) solutions and dental management systems. QNM had previously divested this 51% stake to its key management personnel in March 2024 for S\$1.6 million.
According to the announcement, EM2AI had been a loss-making business unit prior to QNM’s divestment in 2024. However, pro-forma financials revealed that the consolidation of EM2AI would have contributed S$0.4 million in net profit to QNM in FY2024. Additionally, EM2AI is now generating positive cash flow.

Better Prospects with Medical Equipment Licence Win in Australia

QNM also announced that EM2AI had received the Medical Devices Included Class 1 licence from the Australian Government Department of Health and Aged Care, Therapeutic Goods Administration, for its dental AI solutions. This licence allows EM2AI to sell and distribute its dental AI solutions in Australia.
EM2AI had entered into a definitive agreement with an established provider of dental solutions in the region to integrate its dental AI solutions into the customer’s platform on March 24, 2025. With the licence win in Australia, EM2AI will now be able to support its customer’s network in Australia and expand the use of its dental AI solutions beyond its current footprint of over 1,100 clinics across Singapore, Malaysia, Thailand, and Vietnam.

Reiterate Add; Estimates Unchanged for Now

CGS International reiterates its “Add” call on QNM, as it likes the company’s efforts to grow its business in FY2025. However, the research firm keeps its FY2025-FY2027 estimates unchanged pending the completion of the EM2AI acquisition.
QNM has identified Singapore, Malaysia, and China as potential markets where it is looking to expand its operations, either through organic or inorganic growth. The research team’s target price of S$0.43 is based on 20x FY2026 P/E, 0.5 standard deviations below its 5-year mean, as it believes a re-rating of the stock will follow more significant improvement to its profitability.
Potential re-rating catalysts include continued improvement in year-over-year profitability for its core dental business and potential mergers and acquisitions that could significantly contribute to its profits. Downside risks include goodwill impairments on EM2AI, unfruitful expansion, and poor integration of acquired clinics resulting in downward pressure on margins.

Impact of EM2AI Acquisition on QNM’s FY2024 Financials (Pro-forma)

| Metric | Before | After | Change | | — | — | — | — | | Net Profit (S\$m) | 14.6 | 15.1 | +2.9% | | EPS (Scts) | 1.55 | 1.59 | +2.6% | | Net Debt (S\$m) | 39.4 | 40.4 | +2.5% | | Total Equity (S\$m) | 108.5 | 109.2 | +0.6% | | Net Gearing (x) | 0.36 | 0.37 | +0.01x |