The Pacific Smiles Group Ltd (ASX: PSQ) share price rose by 3.23% yesterday. This was due to a management services agreement with HBF in Western Australia.
Pacific Smiles Group operates dental clinics and provides all of the resources necessary to enable dentists to give optimal clinical services. The company has independent dentists who benefit from consistency of systems and standardised training for all staff. In addition, dentists practising from Pacific Smiles centres typically have preferred provider agreements in place.
Image source: Getty Images
What moved the Pacific Smiles share price?
Yesterday the group announced it has signed an initial 10-year base term management services agreement (MSA) with HBF.
HBF is the leading health fund in Western Australia, where it has over 50% market share. It is Australia's fifth largest health insurer and the country's second largest not-for-profit health fund.
Under the MSA, HBF will build a minimum of 5 HBF Dental (HBFD) clinics in WA over the next 18 months. Additionally, Pacific Smiles will be the exclusive operator of these and any additional clinics in Western Australia for the term of the agreement.
Pacific Smiles will receive a percentage of revenue from the operations. In return, the company provides comprehensive operational support for the design, construction, and all aspects of the clinics' day to day operations. Correspondingly, HBF will be responsible for funding capital expenditure and in-clinic operating costs.
Furthermore, the 2 organisations are working on extending HBF Member Plus to all dentists from Pacific Smiles clinics in the eastern states.
Mr Phil McKenzie, Pacific Smiles' Chief Executive Officer said:
This relationship consolidates Pacific Smiles' position as the leading organic growth focused dental services organisation in Australia. We see this partnership as a compelling way to provide our services to an entirely new population of patients and dentists, and we are delighted that HBF has placed its trust in us to deliver a high quality dental care experience for their members.
How has Pacific Smiles performed recently?
The company's share price rose by 3.23% yesterday to $1.60 per share, valuing Pacific Smiles at $245.62 million with a price-to-earnings ratio of 28.73. At this price, the company has a trailing 12 month dividend yield of 3.69%.
The company has seen a decline in FY20 revenues against the prior year by approximately 0.7% due to the COVID-19 crisis. However, as restrictions have started to ease in May the company has seen steady growth in bookings.
