ASX-listed Dental Stocks: Is there any relief coming in? PSQ, ONT, SIL

Summary

  • The industry body, AHPPC approved the move to Level 1 dental service restrictions from Level 2, effective 8 May 2020. The move allowed the complete range of dental treatments to be performed with COVID-19 precautions in place.
  • The easing of restrictions in the past few weeks has led to reopening of dental centres across the country. However, the recent surge in the number of cases might affect the industry.
  • Pacific Smiles Group provided its guidance update for FY20 mentioning the EBITDA in the range of A$22.3-A$22.8 million.
  • Before the detrimental impact of COVID-19 pandemic, the business of 1300 Smiles was performing better than anticipated.

Due to the rising number of coronavirus infections, many businesses were shut down amid COVID-19-induced restrictions. At the same time, some businesses urged their employees to work from home to maintain business continuity and help slow the spread. The impact of the pandemic on the dental industry was the same as that on other industries with dental assistants, dentists and other dental staff out of work during the period.

However, countries are now trying to recover from the economic losses triggered due to the coronavirus outbreak. They are opening the businesses with some restrictions still in place.

The Australian Health Protection Principal Committee (AHPPC) approved the move to Level 1 dental service restrictions from Level 2, from 8 May 2020, as outlined in managing COVID-19 guidelines of Australian Dental Association (ADA). The level 1 restrictions allow the complete range of dental treatments to be carried out while ensuring COVID-19 precautions are retained.

HAVE YOU READ: Australian Dental Industry and ASX listed Stocks amid COVID-19 Pandemic

The Australian Dental Association stated that it would continue to monitor any modifications to the dental industry, as well as any news relevant to the broader business.

With this backdrop, we will discuss how these three ASX-listed dental stocks are responding to COVID-19 pandemic:

Pacific Smiles Group Provided FY20 Guidance

Dental care player Pacific Smiles Group Limited (ASX:PSQ) manages the Pacific Smiles Dental Centres. Pacific Smiles is headquartered in Greenhills and has its operations in New South Wales, Australian Capital Territory, Victoria, and Queensland.

Source: Company's presentation

On 24 April 2020, Pacific announced that it intends to reopen most of its 93 dental centres, post a period where just 17 were in operation.

The reopening was in response to the broadening of the range of dental procedures approved by the AHPPC, after the relaxations in COVID-19-associated restrictions.

A Decline of 0.7% in Patients Fee

Pacific Smiles stated on 30 June that the Company is now able to issue guidance for the financial year 2020:

  • For FY20, the patient fee is expected to be ~A$185.8 million, a decline of 0.7% on the prior year (same centre patient fee decline of nearly 4.5%).
  • Anticipates underlying EBITDA in the range of A$22.3-A$22.8 million.
  • Net debt predicted to be nearly A$8.5 million.
  • Notably, due to the easing of dental procedure restrictions in May 2020, patient demand increased as patients rebook. As of 28 June 2020, same centre patient fee growth for June was ~7%.

Moreover, the Company stated that it will release its full-year results on 20 August 2020 and will also provide an update on trading as well as the outlook for the fiscal year 2021.

Stock Information: On 01 July 2020, PSQ shares were trading at A$1.570 (at 02:23 PM AEST), in line with the previous close. The market cap of PSQ stood at A$241.02 million, with 153.52 million shares trading on the ASX.

1300 Smiles Limited Provided COVID-19 Update in April

Australian dental & management service provider 1300 Smiles Limited (ASX:ONT) owns and operates full-service dental facilities across Australia including Queensland, NSW and South Australia. The Company provides use of dental services along with practice management to self-employed dentists and therefore allow the delivery of services to the patients.

The services provided by ONT allow the dentists to focus on the delivery of dental services instead of the administrative aspects of carrying on their businesses.

On 6 April 2020, the Company disclosed that it had been trading satisfactorily for most of the March 2020 quarter. However, since late-March 2020, the pandemic has had a significant impact on operations and trading of the Company.

ONT had about 50% of its practices open through its network, at least on a part-time basis, depending on the demand of patient and the availability of dentist and staff.

The Company had approximately A$10 million in undrawn facilities and significantly appreciated the relationship and support with its bankers.

Before the COVID-19 pandemic and its damaging effects, the business of ONT was performing better than anticipated, with robust same-store sales expansion reported in the March-20 quarter, nationwide as well as around the world.

Stock Information: On 01 July 2020, ONT shares were trading at A$5.180 (at 02:23 PM AEST), an increase of 0.388% compared to the previous close. The market cap of ONT stood at A$122.18 million, with 13.68 million shares trading on the ASX.

Smiles Inclusive provided amendments in quarterly cash flow report

Queensland-based Smiles Inclusive Limited (ASX:SIL) operates a network of dental practices across Australia under the national brand, Totally Smiles. The Company is based in West Burleigh and provides several dental services including general, family, and specialist services.

On 30 June 2020, Smiles Inclusive announced a loan agreement (short-term) with HOLZRC Pty Ltd worth A$200,000 (@10% p.a. interest rate) to meet working capital needs. Also, the Company will allow options to HOLZRC to purchase 4 million fully-paid ordinary shares at A$0.025.

On 15 May 2020, Smiles Inclusive revealed the reopening of all dental centres following the AHPPC approval to move to Level 1 dental services. The easing of restrictions implies that full dental services could be provided under the guidance of COVID-19 protocols.

Moreover, Smiles Inclusive has released its Appendix 4C quarterly cashflow report and provided an update on trading for the 3-months ending 31 March 2020.

The Company disclosed that cash inflows for the third quarter of the fiscal year 2020 included the following:

  • Smiles Inclusive raised capital of approximately A$436,000.
  • Moreover, the initial cash inflows associated with the relaunch of the mobile business.

SIL disclosed that restructure activities for the business are continuing, although in the face of challenges driven by COVID-19. In March 2020, the business was forced to close a majority of practices because of the guidance provided by the Australian government and confirmed by the AHPPC.

The Company had said 1/3rd of its practices restarted businesses as of 27 April 2020, even though there were Level 2 restrictions still in place. The Company continues in its negotiations for securing further financial support to enable the turnaround of the business to continue.

Stock Information: The SIL stock was under suspension on 1 July 2020. The shares last traded at A$0.035.


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