Q&M unit to sell off stake in Chinese company; floats possible special dividend from part of $17m proceeds

Aidite Qinhuangdao makes zirconium oxide blocks that go into dental prosthesis machines. PHOTO: AIDITE / FACEBOOK

SINGAPORE (THE BUSINESS TIMES) - Mainboard-listed dental clinic operator Q&M Dental Group (Singapore) is selling off its remaining stake in a Chinese dental equipment maker.

A subsidiary of Q&M is set to divest its interest in Aidite (Qinhuangdao) Technology Co for 122.46 million yuan (S$25.1 million), under the share purchase agreement inked and disclosed on Friday.

Aidite Qinhuangdao, which makes zirconium oxide blocks that go into dental prosthesis machines, will buy back the shares and pare down its registered capital.

Q&M expects to net about S$17 million in proceeds from the deal, which its board said will go towards working capital needs, business expansion, and a potential special dividend.

The amount of the special dividend "may be determined by the board to the shareholders (subject to regulatory requirements and prevailing market conditions)", it added.

The company now has an effective stake of 9.19 per cent in Aidite Qinhuangdao, through subsidiary Q&M Aidite International Pte Ltd's 12.246 per cent interest.

Under the share purchase agreement, the zirconium oxide block manufacturer will buy back the Q&M unit's shares and pare down its registered capital.

The Q&M board called the sale an essential move, "as it will strengthen the group's balance sheet and provide further resources for the future expansion of the group".

The net asset value of the sale shares was S$11.5 million, according to unaudited consolidated financial statements for the half-year to June 30, 2020.

On a pro forma basis, Q&M's net tangible assets would have risen from 8.70 Singapore cents a share to 9.33 Singapore cents a share, had the sale been done on Dec 31, 2019, the board said. Net gearing would have gone from 0.84 time to 0.81 time.

Pro forma earnings per share would have dipped from 2.56 Singapore cents to 2.54 Singapore cents, assuming that the disposal went through on Jan 1, 2019.

The price tag for the transaction was based on an agreed valuation of Aidite Qinhuangdao at one billion yuan; no independent valuation was carried out.

Q&M bought Aidite Qinhuangdao in February 2014. The unit was spun off on China's New Third Board in 2016 but delisted two years later.

Q&M shares closed flat at S$0.475 on Friday, before the announcement.

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