Investors Smile with ASX-listed 1300 Smiles’ Stock Price Momentum

Summary

  • Amid the COVID-19 induced disruptions, dental staff remained out of work, and the dental industry witnessed the impact of COVID-19 like other businesses.
  • ASX-listed dental stock 1300 Smiles Limited rose by 6.066% to A$6.470 on 11 August 2020, cheering up investors’ sentiments.
  • Revenue of 1300 Smiles rebounded sharply after 11 May and climbed by 15% in June.
  • The Company will pay a final dividend flat at 12.5 cents per share to take full-year dividends up 3% to 25.75 cents per share.

The growing number of COVID-19 cases have led to several businesses going bankrupt with forced to ask their employees to work from home amid the pandemic-induced precautionary measures taken to curb the rapid spread of the virus. The impact of COVID-19 on the dental industry was no different from other industries with dentists, dental assistants and staff members remaining out of work as most of the dental services didn’t form a part of essential services.

As nations continue to struggle to recover from the economic drops triggered by COVID-19, businesses have slowly started opening, albeit with some restrictions in place.

ALSO READ: ASX-listed Dental Stocks: Is there any relief coming in?

With the pandemic-related challenges highlighted above, there is one ASX-listed dental stock which has done reasonably well with an impressive 3-month return of 18.45% and has ended the day’s trade an impressive 6.066% higher. The dental player under discussion is 1300 Smiles Limited (ASX:ONT) which announced its FY2020 results that led to the favourable investor sentiment. The market capitalisation of ONT stock stood at A$144.44 million.

About 1300 Smiles Limited

Australian dental and management service company 1300 Smiles Limited owns and operates full-service dental facilities across Australia including South Australia, NSW, and Queensland. The Company offers the 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 1300 Smiles permit the dentists to emphasise on dental services delivery instead of the administrative attributes of carrying on their businesses.

Revenue rebounded sharply after 11 May, Rose 15% in June

On 11 August 2020, ONT disclosed its results for the financial year 2020. Revenue was significantly reduced during the period of maximum economic restriction. During the time of Level 2 and Level 3 restrictions (from 23 March to 11 May 2020) practices of ONT were remained close and the activities at many others were limited.

However, after 11 May 2020, the revenue of 1300 Smiles rebounded sharply, with June 2020 delivering the highest monthly revenue ever, and by a significant margin.

  • In FY20, revenue (OTC) dwindled by 3% to reach A$57.1 million; statutory revenue was down 3% at A$40.7 million.
  • EBITDA stood at A$16.2 million, up 22%.
  • NPAT reported at A$7.1 million, down 8%.
  • NPBT was down 9% at A$9.8 million.

On a quarterly basis, revenue in 2020 surpassed revenue in the previous year in each of the first three quarters. Over the first three quarters, revenue was up by more than 7% from a year earlier.

Revenue for June FY20 increased by 15% vs June FY19

All the COVID-19 induced disruptions were captured within the final quarter of the year, leading to adverse YoY movements as demonstrated in the image below-

All the practices of ONT were shut down for several weeks between March and May 2020 in response to the COVID-19 pandemic. By June 2020, though, all the facilities were open, and revenue in the last month of the financial year 2020 was substantially higher compared to the prior corresponding period. Notably, this trend has remained through July 2020, where revenue for July 2020 is up 11% as compared to July 2019.

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

Moreover, the Company also disclosed that:

  • Online bookings during FY20 had increased by 70% as compared to FY19.
  • The payment plans had soared by 55% in FY20 vs FY19.
  • In the last three years, new patients have risen 37%.
  • Percentage of patients reappointed has increased by 61%, compared to 52% in FY19.

Dividend Payment

1300 Smiles disclosed that the Company would pay a final dividend flat at 12.5 cents per share to take FY dividends up 3% to 25.75 cents per share.

DID YOU READ: Australia’s top dentistry businesses and interesting ASX stocks.

Practice Acquisitions- During 2020, 1300 Smiles acquired established multi-dentist practices in Laidley and Gatton, both in Queensland. The Company states that none of these acquired practices has a material impact on the results, despite all made positive contributions to the revenue and profit for the year, and meet operating efficiency standards of ONT.

Future Advancements

The Company is working with the core objective of increasing profits as well as shareholder returns and aims to achieve a combination of organic growth in all locations.

The major development drivers for the Company in the future are:

  • Growing profits by attracting more dentists to the existing facilities of the Company and increasing those facilities which are already at full capacity.
  • Supporting dentists who already practice within the 1300SMILES system to boost their turnover and income through training, benchmarking, and mentoring.
  • Launching new practices in current as well as new regions (like greenfield sites).
  • Acquiring substantial existing practices.

Dr Daryl Holmes, the Managing Director 1300 Smiles, depicted the findings as a ‘startling change’, as the business rebounded and reached revenue and profit levels higher than ever before. Moreover, the Company has the ability to cope with and respond positively to the challenges posed by COVID-19 pandemic.

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