Q&M Dental Group’s AI Expansion and Streamlining Efforts Boost Profitability
KGI Securities | March 28, 2025
Expansion of AI Solutions Business
EM2AI, a 49%-owned associate of Q&M Dental, has secured regulatory licenses across multiple jurisdictions for its dental AI solutions. The company also signed a Memorandum of Understanding (MoU) with a regional dental solutions provider, enabling it to expand its footprint. With this collaboration, EM2AI is now set to provide its AI-powered dental solutions to over 1,100 clinics across the region, positioning the company for further growth.
Increased Profitability Outlook
Q&M Dental Group reported a strong improvement in profitability, with net profit margin (NPM) rising by 18.0% to S\$13.1 million in FY24. This was driven by cost-cutting initiatives, including the closure of underperforming clinics and the winding down of its medical laboratory business in September 2024 following the decline of COVID-related operations. Several expense categories declined year-over-year, reflecting the company’s effective streamlining efforts. We expect these efficiency gains to sustain profitability into the next financial year.
Dividend Announcement
The Group announced an interim dividend of 0.70 Singapore cents per share for 2H24, bringing FY24 annual dividend to a total of 1.1 Scents, representing a dividend payout ratio of 71%.
Valuation and Recommendation
We reiterate our OUTPERFORM recommendation on the Group’s strong 1H24 results and keep our target price (TP) unchanged at S\$0.35, based on a Discounted Cash Flow (DCF) method with a terminal growth rate of 2% and a WACC of 9.0%. Q&M Dental Group’s resilient business, along with its investment into dental AI & technology, positions the company well for future growth and to capture the majority of dental services demand in its local and overseas markets.
Financial Performance
Q&M Dental Group reported revenue of S\$180.7mn for FY24, a 1.1% decline YoY, compared to S\$182.7mn in FY23, mainly due to the cessation of the Group’s medical laboratory business. PATMI rose by 27.1% YoY to S\$14.6mn in FY24, compared with S\$11.5mn in FY23. EPS rose to 1.55 Singapore cents in FY24, compared to 1.22 Singapore cents in FY23.
For the Group’s business segment, dental business revenue grew marginally to S$173.8mn in FY24, up from S$173.0mn in FY23, supported by higher contributions from its Malaysia operations. Revenue from other businesses declined primarily due to the cessation of the Group’s medical laboratory business in September 2024.
Ongoing Investments in AI
Q&M Dental continues to invest in AI through its subsidiary, EM2AI, to drive efficiency and innovation in dental care. EM2AI has developed multiple AI-powered solutions, including a caries detection system, an AI-driven treatment planning system, and an AI-based patient management system. The company recently introduced its “Treatment Plan” AI module, which integrates Large Language Models (LLMs) to optimize treatment recommendations.
Expansion into New Markets
EM2AI has obtained regulatory licenses to sell and distribute its dental AI solutions in Thailand, the Philippines, Vietnam, and Indonesia, expanding beyond its existing presence in Singapore and Malaysia. The company has also signed an MoU with an established regional dental solutions provider, granting the partner a license to integrate EM2AI’s technology into its platform. This collaboration positions EM2AI to provide its dental AI solutions to over 1,100 clinics across Southeast Asia.
Future Plans
Q&M Dental is actively exploring regional expansion opportunities, with a focus on Malaysia, particularly within the Johor-Singapore Special Economic Zone (SEZ). The upcoming Rapid Transit System (RTS) is expected to enhance connectivity between the two countries, making Johor an attractive market for growth. The company is evaluating partnerships, acquisitions, and organic expansion to strengthen its presence in high-growth markets across Southeast Asia.
