Q&M Dental Group acquires business in China

SINGAPORE - Singapore-listed Q&M Dental Group agreed Tuesday to pay S$21.6 million($17 million) through a subsidiary for a 60 percent stake in Aoxin Stomatology Group based in China's northeastern major city of Shenyang.

The group's founder and chief executive officer Ng Chin Siau said his firm expects the acquisition to help expand its presence in the fledgling market in northeastern China with a "ready-made stage and presence."

"This is obviously a significant step in our expansion plans in China ... We believe this partnership will translate to favorable returns to our shareholders and to the business in the near future, " Ng said.

A leading private provider of quality dental services, Aoxin was founded in 1993. It owns three dental hospitals, three dental clinics and a training center, with a total net tangible asset of 23 million yuan ($3.8 million). It has more than 100 dentists and more than 100 nurses.

Aoxin reported a turnover of 42 million yuan last year with a net profit of 11.8 million yuan.

Under the Memorandum of Understanding signed on Tuesday, Q&M China will receive a profit guarantee from Shao Yongxin, founder of Aoxin, in the form of dividends of at least 133 million yuan ($21.7 million). Shao, who still holds the 40 percent stake in Aoxin, will remain with the management for at least 12 years.

Ng said the Chinese market for dental services is only at its initial stage of fast growth, with private clinics providing only about 8 to 10 percent of the services demand. The rest is provided by the vast network of government hospitals.

Shao, a dentist himself, said that he appreciated the fact that all the 18 main shareholders of Q&M are dentists, who he believes will have a strong sense of social responsibility and will not pursue profit as the only goal.

"People's awareness of health is growing, and I do not see any potential fundamental change to the situation of dental services shortage in China in the coming 8 to 10 years," Shao said.

Shao said he had sought a strategy of market differentiation by targeting only the medium- to high-end customers. The fees for the services provided by the hospital are typically some 10 percent higher than the fees charged by government hospitals.

Shao also tried very hard to groom his own team of doctors by giving them the needed proper training on the job.

"It takes us some ten years to groom a qualified dentist," he said. "I have been mentoring quite a number of dentists myself."

Q&M was founded in 1996. It now has 52 dental clinics and four dental centers in Singapore. It also has presence in Malaysia and China.