Credit Update: Q&M Dental sinks its teeth into Australia and Thailand, reshaping its credit profile

Since we last updated Q&M Dental Group (Q&M) in March 2026, the group has reported its first-half results ending 30 June 2026 (1H26) and announced its two largest acquisitions to date. In the article below, we review the latest numbers and assess what the acquisitions mean for Q&M’s credit profile.

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Q&M Dental Group (Q&M) reports across two segments: 1) Core dental business, comprising dentistry and dental supplies distribution across Singapore, Malaysia, and China, and 2) Other businesses, a legacy bucket of family medicine and aesthetics that now contributes less than 1% of revenue. Accordingly, we think Q&M’s credit profile is best viewed through the lens of its core dental business.

Steady 1HFY26 performance, with the core dental franchise continuing to grow

Overall group revenue rose 13% YoY to S$99.5m (1HFY25: S$88.4m), led by a 13% YoY increase in the core dental business from S$87.2m to S$98.6m. Most of this came from the consolidation of Aoxin Q&M from an equity-accounted associate to a subsidiary in June 2025, which lifted China revenue to S$14.0m (1HFY25: S$2.7m). Malaysia grew 14% YoY to S$6.6m, while Singapore eased 1% YoY to S$78.9m, as revenue from a larger network of 113 dental outlets (1HFY25: 108) was offset by lower profit guarantee income* of S$0.08m (1HFY25: S$1.3m). Excluding China, group revenue was flat YoY.

Costs rose in step with the consolidation, with core dental's cost of sales up 36.6% YoY to S$13.2m and employee benefits up 15.9% YoY to S$59.9m. Reported EBITDA rose 19.1% YoY to S$19.2m, with margins widening to 19.3% (1HFY25: 18.3%). Both periods, however, include one-offs: a S$4.3m non-cash loss on the Aoxin consolidation in 1HFY25 and a S$1.4m property disposal gain in 1HFY26. Excluding these, EBITDA was S$17.9m (1HFY25: S$20.5m), reflecting Aoxin's lower-margin mix.

Below EBITDA, depreciation and amortisation rose to S$10.6m (1HFY25: S$9.0m), while finance costs rose to S$3.7m (1HFY25: S$2.3m) on a full half of coupon interest on the 2028 bonds (issued in July 2025). A lower tax charge lifted net profit from continuing operations 27% YoY to S$5.1m. Notably, net profit from the core dental business rose 9.8% YoY to S$15.0m (1HFY25: S$13.7m), underscoring the resilience of the group's core dental earnings.

Geographically, Singapore remains the bedrock, while China has become a meaningful contributor. Singapore revenue was broadly stable at S$78.9m (1HFY25: S$80.0m), or 79% of group revenue, as a larger network of 113 dental outlets (1HFY25: 108) helped soften the lower profit guarantee income. Malaysia revenue, meanwhile, grew 14.4% YoY to S$6.6m. China revenue rose to S$14.0m (1HFY25: S$2.7m), or 14% of the group, following the full-period consolidation of Aoxin Q&M.

On balance, we view 1HFY26 as a period of consolidation. The core business continues to deliver resilient earnings, while margins reflect the lower-margin mix from Aoxin. Looking ahead, we think there is scope for EBITDA growth in 2H26. Further growth should come from Aoxin’s expansion, and more significantly, the upcoming acquisitions in Australia and Thailand.

*Profit guarantee income refers to the payment received by Q&M Dental from selling dentists should their clinics fail to meet pre-agreed earnings targets

Upcoming acquisitions nearly double Q&M’s scale

The major development to Q&M’s dental profile is what the group announced after 1HFY26: In July 2026, Q&M announced the acquisition of 100% of Experteeth (39 practices in Australia) and an effective 51% of Deezy Q&M (33 clinics in Thailand), expanding the group’s overall number of outlets by around 45%.

These two acquisitions involve a combined consideration of about S$146m. Of this, roughly S$85m (58%) is payable in cash, while the remaining S$61m (42%) is settled through the issuance of new Q&M shares. Including a separate A$30.4m (~S$27m) equity injection into Experteeth to repay its financing facilities and fund expansion, we estimate Q&M’s total cash requirement at about S$112.2m, of which about S$17m is deferred and contingent on Experteeth meeting its profit targets. Management expects the bulk of this outlay to be met through existing bank facilities and internal cash on hand. Beyond these two deals, Q&M has three further acquisitions at non-binding MOU stage in Singapore and China, with no disclosed timeline or funding requirement.

In return, management's illustrations, anchored on the profit guarantees, point to a meaningful step-up in earnings. In Year 1, Experteeth and Deezy are projected to contribute S$15.2m and S$7.2m of EBITDA respectively, or S$22.4m combined, equivalent to about 59% of FY25 group EBITDA of S$37.8m. By Year 5, the two deals are projected to contribute S$38.2m of EBITDA, with Thailand the faster growing of the two. At the group level, management illustrates Year 1 EBITDA of S$90.8m, rising to S$120.5m by Year 5. That said, these group figures also include three further acquisitions in Singapore and China that remain under negotiation. Stripping these out, we estimate that Q&M's FY25 EBITDA of S$42.4m plus the Australian and Thai contributions gives a Year 1 EBITDA of roughly S$65m, rising to about S$81m by Year 5 if the existing business stays flat. Put differently, the two signed deals account for less than half of the S$78m EBITDA uplift management illustrates by Year 5, with the balance resting on acquisitions that have yet to be finalised.

Looking ahead, we caution that management’s illustrated figures carry significant execution risk. Integrating two large networks in new markets will take time, and the benefits are unlikely to show up meaningfully in the near term. The profit guarantees offer some protection, but they rely largely on the vendors making good on any shortfall. Experteeth guarantees about A$112.6m (S$101m) of profit over eight years, rising from about A$10.3m (S$9m) in Year 1 to A$16.6m (S$15m) a year by Years 6 to 8. The guarantee is backed by an A$8 million (S$7 million) escrow and A$18.75 million (S$17 million) of deferred payments that Q&M only pays if targets are met. Deezy guarantees about THB 1.25 billion (about S$48 million) of profit over six years, backed by an escrow, a share pledge and the vendor's dividends.

While management has shown its ability to integrate a large acquisition in the recent past (Aoxin), we think it is too early to render a judgment on how these two large acquisitions will turn out. As such, our credit assessment does not factor in this earnings step-up, although the deals would strengthen Q&M's earnings profile if executed well.

Note: The EBITDA figures related to the acquisitions in this segment are illustrations provided by management and do not constitute a forecast, projection or guarantee of future performance.

Credit profile at its strongest in years, but set to re-lever post-acquisitions

Importantly, Q&M enters the deals from a position of strength, with its credit profile improving further compared to 31 December 2025. As of 30 June 2026, cash and equivalents stood at S$119.2m (FY25: S$117.1m), while gross debt came in at S$141.4m (FY25: S$143.4m). Consequently, net gearing (net debt/equity) improved to 16% (FY25’s 21%), and net debt / TTM EBITDA softened to 0.54x (FY25: 0.7x). Meanwhile, interest coverage (TTM EBITDA / TTM Finance costs) is healthy at 5.3x, comfortably above the 1.75x bank covenant.

However, these figures are in the rearview. Given the two new major acquisitions, we expect net debt to increase to roughly S$134.4m (compared to existing net debt of S$22.2m). Against TTM EBITDA of S$40.9m and the addition of S$22.4m in year 1 EBITDA contribution projected for the two deals, pro-forma net debt / EBITDA is expected to rise to about 1.7x. Net gearing would similarly rise, albeit at a lower rate, cushioned by the new issuance of shares. The additional tapping of bank facilities will also lift finance costs. We estimate S$95–112m of new borrowings at a 4–5% cost would add roughly S$4–5.5m of annual interest, taking finance costs to about S$13+m from a TTM interest expense of S$7.8m. Against this, coverage depends on whether the acquired earnings arrive on schedule. If the Australian and Thai businesses deliver their projected S$22.4m of Year 1 EBITDA, interest coverage would soften slightly to roughly 4.7x, as EBITDA growth trails the rise in interest costs. If they contribute nothing, coverage will fall to about 3.1x. Both scenarios sit comfortably above the 1.75x bank covenant.

In sum, the latest update from Q&M demonstrates the M&A and execution risk we explicitly flagged in our last update. While the embedded profit guarantee arrangements might help to cushion cash generation, we stress that the future development of the group’s credit profile ultimately hinges on management’s ability to integrate these new major acquisitions. 

Bond recommendation: