Q & M Dental Group operates over 70 dental clinics in Singapore and a smaller number in China and Malaysia. For 2015, their revenues came from Singapore (70%), China (23%) and Malaysia (6%).

Q & M’s growth has accelerated in recent years as they sought to increase their market share by acquiring established dental practices. The purchase agreements stipulate that the existing dentists continue to run the practice and responsible for achieving profit targets.

Growth fueled by debt never has a happy ending.

On this front, 2015 was a busy year for Q & M!

They acquired a string of clinics in Singapore for close to $60 million of which $34 million was satisfied in cash while the remaining $26 million was in new shares. Following these transactions, Debt/Equity Ratio rose from 32% to 76% while intangible assets, mostly goodwill from acquisitions, doubled to $76 million and constituted a significant 30% of the company’s $ 232 million in assets.

Q & M’s full-year results for 2016 validates our analysis. Full year revenue grew 21% y-o-y, but total income (less one-off gains) fell 34%.

While that in itself is not conclusive, growth fueled by debt never has a happy ending.