Three Stocks in Dental Space- ONT, SIL, PSQ

The Australian Securities Exchange ended the trading session on a quiet note on 26 September 2019, as majority of the sectors witnessed a downward momentum including the Health Care (Sector), with the benchmark index S&P/ASX 200 under the code (XHJ) which last traded in red at 35,630.6, down by 375.4 points or 1.05% from the previous close.

In this article, we would discuss the three health care stocks in dental space, which trades on the ASX. The following ASX-listed companies from dental space reported impressive financial results for the year ended 30 June 2019.

Let’s take a quick look at how the year went by for these companies.

ONT 1300Smiles Limited

ONT 1300Smiles Limited (ASX: ONT), is an Australian-based dental and management services company that owns and operates full-service dental facilities across Australia including South Australia, Queensland, and New South Wales, constantly seeking to expand over other regions within Australia.

The company offers its services by delivering the use of dental surgeries, practice management, & other services to self-employed dentists and dental professionals. Comprehensive services provided to the dentists by 1300Smiles include- services related to marketing, administration, collections & billing, facilities certification as well as licensing.

Recent ASX Update

  • 1300Smiles released a noticeon 25 September 2019, regarding its keen interest in acquiring the Maven Dental Group from Abano Healthcare Group Limited listed on New Zealand Stock Exchange (NZX: ABA) and Abano's response.
  • The company confirmed about the on-going confidential discussion with Abano and is also steering due diligence investigation, the consequence of which remains speculative, further indicating whether the agreement would reach or any transaction would materialise is not certain from this current or any future discussions, a point worth noting by the investors.
  • Additionally, the company informed that the market and the shareholders would be updated further, given the negotiations are completed and eventuate in a binding agreement.

Key Highlights from FY2019 ended 30 June

For the given year, 1300Smiles observed strong growth on all important measures. The company recognised Over-the-Counter (OTC) Revenue of $58.9 million with an increase by 5.5%. The recognised Statutory revenue amounts to $42.0 million showing an increase by 6.6%. The Company also declared net profit after tax (NPAT) of $7.8 million, up by 1.8% and EBITDA of $13.3 million, up by 1.4 %. Further, the company reported earnings per share up 1.8% to 32.8c and dividends per share up 4.2% to 25c.

Stock Performance

On 26 September 2019, 1300Smiles’ stock last traded in green at $6.100, up by 2.007%. The market capitalisation stands at $141.6 million and 23.68 million outstanding shares with a negative YTD return of 7.43 %.

Smiles Inclusive Limited Limited

Smiles Inclusive Limited (ASX: SIL) is an Australian Dental service provider that currently owns 56 dental practices operational at 82 sites across Australia under the brand-Totally Smiles, with many more in the pipeline.

The company has a vision to establish and implement standardised systems and operational procedures, effective and complete integration of the acquired practices into the business, to realise the benefit of scale that includes increased efficiencies, purchasing power and enhanced patient management & experience, and to increase practice revenues by enhancing marketing capability, upskilling providers, improving chair utilisation and reviewing prices.

Highlights from Investor Presentation

SIL’s Capital raising: The company intends to raise $3.33 million through a fully underwritten 1 for 1 pro-rata accelerated non-renounceable entitlement offer, the funds will be used to reduce debt, stablise cashflows and operations and entirely execute the turnaround plan adopted by the Board. This Entitlement Offer is expected at an offer price of $0.05 per fully paid ordinary share in the company.

SIL’s Turnaround plan: The turnaround plan was adopted by SIL’s board in May 2019, with its key elements centered around the following:

SIL’s Business Model: The company laid a clear and an ambitious business plan to realise its original vision for the “business in sustainable way”, despite having a disappointing start of the year due to the absence of specific and effective management strategy.

SIL’s Business Structure. Source: Investor Presentation

FY2019 Financial Performance

As per the preliminary financial report released by SIL on 30 August 2019, the company proclaimed an underlying loss after tax of $4.497 million. Smiles Inclusive has observed a poor financial performance for the given year driven by losses in revenues, overrunning cost, litigation issues resulting in significant legal costs and a failed attempt to develop suitable business model.

Trading Halt

On 23 September 2019, the shares of Smiles Inclusive Limited were placed under the trading halt, pending an announcement on accelerated pro-rata entitlement offer and its subsequent outcome. Further, on 25 September 2019, on SIL’s request, ASX agreed to extend the trading halt till 27 September 2019.

Stock Performance:

SIL’s stock last traded at $0.060 on 23 September 2019. The market capitalisation stands at $4 million and 66.62 million outstanding shares with a negative YTD return of 79.66 %.

Pacific Smiles Group Limited

Pacific Smiles Group (ASX: PSQ) is an Australian-based company dealing in the business of dental care. The company offers fully serviced dental facilities by independent dentists providing clinical treatments to patients. Fees charged to dentists for these services derives the main revenue for the company.

Pacific Smile has a mission to improve the oral health of all the Australians to the world’s best.

Change of Director’s interest

The company recently updated that Zita Peach, one of the directors, on 16 September 2019 acquired 9,493 ordinary fully paid shares at a consideration of $1.620, as mentioned in the change of director’s interest notice. The director currently holds a total of 21,833 shares in the name of Mr James Peach + Mrs Zita Peach.

FY 2019 Results

PSQ has realised a strong growth record for the full year ended 30 June 2019.

  • Increased revenue by 16.9% to $122.2 million indicating growth from 10 new dental centres opened in FY 2018 and FY 2019, an increase by 11.3%, and strong patient fee growth by 11.3% amounting to $187.4 million along, with a strong growth from the same centre patient fees up by 8.6% as compared to 5.1% in 2018.
  • The Underlying EBITDA came up by 6.0% to $22.8 million. A higher than expected telecommunication infrastructure expenditure of $0.7 million and a lower than expected fees per appointment of $0.4 million impacted the EBTIDA.
  • A robust EBITDA performance for the second half of 2019, growing at 9.6% in comparison to the second half of 2018.
  • EBITDA performance in H2 2019 was strong, growing at 9.6% on H2 2018.
  • In recent years, PSQ has seen a speeding development of new centres that resulted in D&A increase by $1.6 million.
  • In FY2019, the Company’s Corporate price denoted 6.2% of patient fees compared to 6.0% in FY 2018, reflecting the investment in new roles and learning and development to support future growth.

FY2020 Guidance

Stock Performance

PSQ’s stock last traded at $1.560, on 26 September 2019, up by 1.299 percent from the last close. The market capitalisation stands at $234.07 million and 151.99 million outstanding shares with a positive YTD return of 18.92 %.


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