Aoxin Q&M Dental Group – the dental business in China of Q&M Dental Group – is selling 57 million placement shares at 20 cents. This is part of an initial public offering (IPO) to raise S$11.4 million ($8.17 million) that will see Aoxin being separately listed on the Catalist secondary board.
The placement is managed by SAC Capital, who is also the sponsor and issue manager. Placement shares are available to retail and institutional investors applying through brokers or financial institutions said Aoxin in its final offer document, which was filed yesterday. However, no new shares are being issued.
According to the company, with expected net proceeds of S$9.1 million raised in the IPO, approximately S$6.4 million will be invested in expanding business operations through organic growth, M&As, joint ventures (JVs) and partnerships. The remainder, about S$2.7 million, will be invested in enhancing infrastructure and working capital purposes.
Total issued shares of Aoxin post-placement will be 355.8 million shares; this translates to a market capitalisation of S$71.2 million. The prospectus notes that as at September 2016, its assets stand at RMB 70.2 million, while its liabilities stand at RMB115.4 million.
Post-placement, a filing indicates that net tangible assets per share will increase from 4.91 cents to 5.74 cents, while earnings per share will decrease from 3.5 cents to 3.23 cents. Its gearing is also set to increase from 74 per cent to 84 per cent, with net borrowings increasing from S$40.68 million to S$47.62 million.
Aoxin’s main shareholders are Q&M Dental, which owns a 54.7 per cent stake, followed by Dr Shao Yongxin, executive director and CEO, whose equity interest in the firm is 36.61 per cent. Post-IPO, Q&M Dental will retain a 45.94 per cent stake, making Aoxin an associated company rather than a subsidiary.
Other risk factors cited by the prospectus include talent acquisition and retention, regulatory approvals and changes in legislation, specifically with regards to China’s public medical insurance scheme. Its reliance on the experience and leadership of key personnel, such as Dr Shao, were also cited.
The company explains: “We generate significant revenue from Insured Patients. In the event that there are any changes to the PRC’s public medical insurance such as any reduction in coverage, Insured Patients may opt for alternative dental services which are cheaper but less effective, or forego treatment altogether. Additionally, Insured Patients may opt for alternative providers of dental services.”
For FY15 ended December, Aoxin posted net profit of RMB 540,000 (S$109,900) on the back of RMB 46.5 million in revenue. This is an increase of 87.5 per cent from a year ago. Meanwhile, the first nine months of FY16 saw it post a net loss of RMB102,000 on revenue of RMB 61.5 million.