Hot stock: Q&M Dental rises 6.7% after news of government tender win

SHARES of Q&M Dental Group rose as much as 6.7 per cent on Wednesday morning, following the previous day's news that the dental service company's subsidiary had won an open tender by the Health Promotion Board (HPB) for the provision of Covid-19 swab and testing services.

As at 9.24am, the counter had surged 4.5 Singapore cents or 6.7 per cent to 71.5 cents, after about 6.6 million of its shares changed hands. The share price later eased to 68 cents around 10.55am before pausing at 68.5 cents, up 1.5 cents or 2.2 per cent, by the midday trading break.

In the second half of the trading day, the stock rose to 70 cents at around 3.50pm, before paring some gains thereafter. The counter closed at 68.5 cents on Wednesday.

With the latest HPB tender awarded to Q&M's 51 per cent-owned subsidiary Acumen Diagnostics, CGS-CIMB is expecting Q&M to potentially conduct an additional 900 daily tests from just Phase 1 sites.

"Our current assumptions are 1,500 tests per day, and we see upside to our earnings per share (estimates). Conservatively, due to lower average selling prices and margins due to the competitive public tender, we expect potential earnings contribution from Phase 1 sites of about S$1 million," wrote CGS-CIMB analysts in a research report on Wednesday.

"We think Phase 2 execution could be more feasible in the later part of 2021 as there have been no alarming cases observed yet in dormitories," they opined.

The research house has an "add" call on the stock with an unchanged target price of S$0.97, which is based on a 25 per cent discount to Q&M's peers due to its smaller market cap.

Maybank Kim Eng also sees upside potential from the group's new Covid-19 testing business segment, with expectations for Acumen to grow its contributions to Q&M's bottom line for the rest of the year.

"Moving forward, (Acumen) will continue to ramp up this business via automation to improve efficiency and productivity to cater for higher number of swab tests conducted by the government, as well as expanding its in-house laboratory testing to include serology tests," wrote Maybank analyst Eric Ong in a separate Wednesday report.

The brokerage has reiterated its "buy" call on Q&M and its target price of S$0.87 remains intact, pegged at a 15 per cent discount to the company's bigger listed peers.