The Motley Fool

Why the 1300 Smiles share price looks on an upward trajectory

This morning 1300 Smiles Limited (ASX: ONT) reported its half-year results for the period ending December 31 2018. Below is a summary of the results with comparisons to the prior corresponding half.

  • Revenue of $30 million, up 7.1%
  • Revenue less amount retained by self-employed dentists $20.5 million
  • EBITDA $7.1 million, up 5.7%
  • Net profit of $4.1 million, up 4.3%
  • Earnings per share of 17.3 cents
  • Fully franked dividend of 12.5 cents per share, up 4.2%
  • Bank debt of $4.4 million

This is a typically solid result of mid-single-digit growth from this dental business aggregator that has an acquisitive and organic growth strategy.

The benefits of having a founder with a heavy shareholding running the business means the group is not likely to stretch its balance sheet with too much debt, or to chase growth for growth’s sake.

This founder-led long-term approach is reflected by a share price that has grown from $1 in March 2005 to $6.12 today in addition to paying some consistent dividends along the way.

The company is Queensland focused and flagged that 7 of its 32 dental practices are in the flood hit town of Townsville, although management affirmed that this will only prove a minor hiccup if anything.

The CEO also flagged that he expects the business will soon announce the acquisition of several larger dental practices to add $6.5 million in additional revenue and a “contribution to EBITDA commensurate with the expected increase to revenue”.

The business has now grown into a market value around $132 million so is still a small cap, which means for any interested investors it has plenty of room to grow.

Other businesses in the sector include rival dental roll up Pacific Smiles Group Ltd (ASX: PSQ) and dental parts supplier SDI Limited (ASX: SDI).

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Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia has recommended 1300SMILES Limited and SDI Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.