Q&M Dental Group: Wait for the Free Fall to Stop

The recent plunge of Q&M Dental Group is expected as the stock has been climbing up very fast for the past two months from $0.39 to $0.60, a whooping 54% increase in two months! Whatever goes up fast, it come down as fast!

In addition, Q&M is over value at current price ($0.51) where the PE is still at 36.6. It is expected Q&M stock price will go down further base on TA and current PE.  Q&M has punched through 20D MA support and the next immediate support is at $0.49 (61.8% Fibonacci Retracement Level). If Q&M cannot hold at $0.49, the stock may go down to as low as $0.369 (23.6% Fibonacci Retracement Level) as there are no obvious supports between $0.369 to $0.49 base on the past history.

Fundamentally Q&M Dental Group is a good stock for long term investing base on the core business in dental services. In addition, the JV to China dentist medical field is a very good strategic move for future business expansion as Chinese government wants to improve the medical services in China. The financial looks good to me too:

  • Net Profit = 13%
  • ROA = 13%
  • ROE = 15.7%
  • Current Ratio = 5
  • Debt to Equity Ratio = Net Cash

Basically I am waiting for a right entry level when the stock reaches the bottom and starts reversing.

This Post Has 6 Comments

  1. dental hygienist

    this post is very usefull thx!

  2. Wei Jin

    Hi there,

    Have you done an intrinsic calculation of the Q&M stock?
    I used the discounted EPS method and came up with a ridiculous number which showed that the company is very over-valued. Based on 2009 financial report, I had:
    EPS: 0.01
    Discount rate:4%
    Growth rate:7%
    Intrinsic value: 0.08/share!!??

    Can you help?


  3. Marubozu

    Hi Wei Jin,
    You are not wrong.. it bases on our assumption and judgement how the Q&M’s business will turn out in future.

    Q&M basically operates in the dental service and the dental service charge will be more or less regulated in Singapore and China. This means that Singapore or China governement will not let Q&M to overcharge the patients. Although JV with China will increase the revenue but I do not expect the revenue will double or triple as this business is still very much dependant on the number of dentists and the equipment. This will probably limit the EPS annual growth rate.

    Due to the above assumptions, I will use the BEST case scenerio (aggresive assumptions)
    EPS = $0.01393
    EPS Growth Rate = 15% (very aggresive growth)
    Discount Rate 7% (in anticipation of the inflation and interest rate to be adjusted upward for the next few years)

    * Base on Discounted EPS Model, Intrinsic Value = $0.21
    * Base on PE Model (PE = 15), Intrinsic Value = $0.21
    * Base on PE benchmarking of similar medical stock (Raffles Medical average PE of 30 for past 3 years), Intrinsic Value = $0.42

    Thus, regardless which method we use now, Q&M is clearly super over value. This is the nature of the stock market because people reacts to good news (JV in China for dental services is a good news for future growth) but people tends to forget how to quantify the earning and revenue growth in dollar and cents.

    Just wait and see until everyone realise that Q&M is too expensive now.


  4. Can

    Very Good site. All posting is accurate and sharp.


  5. masterofboots

    hi, has fallen to 49 cents. time to go in?

  6. Marubozu

    All information are in my post and comments. You make your own decision.

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