Thursday, April 4th, 2019
Leading ASX-listed dental services company 1300 Smiles (ASX: ONT) looks well positioned to drive growth in a tough market, having recently announced a material acquisition in South East Queensland.
ONT owns and operates full-service dental and orthodontic facilities across New South Wales, South Australia, and in the ten major population centres in Queensland. ONT’s goal is to build out a national footprint over the coming decade.
ONT started life as Townsville Family Dental Pty Limited in September 2000 before listing on the ASX in March 2005. Upon listing, ONT had a total of 6 dental surgeries in operation in Queensland. Today, ONT has 34 established multi-dentist facilities, reflecting the steady build out of its footprint in recent years.
The company provides comprehensive services in the areas of marketing, administration, billing and collections, facilities certification and licensing to all dentists operating within its network. The company also provides all support staff, equipment and facilities, and sources all consumable goods using the buying power derived from a large (and growing) group of dental facilities. The services provided by the company, therefore, allow dentists to focus on the delivery of dental services rather than on the administrative aspects of their businesses.
Recent results have been typically solid. First-half revenue was up 3.9 per cent to $20.5m while profit was up 4.3 per cent to $4.1m. Post results, ONT announced the acquisition of two established, multi-chair dental practices which are expected to make an immediate contribution to earnings.
Though only a small cap, ONT has a sound long term track record, with per-share earnings, dividends and operating cash flow approximately tripling over the past decade. Operating cash flow has consistently exceeded reported profit, which in turn has allowed ONT to self-fund its growth objectives while also paying out consistent income to shareholders.
This track record is certainly reflected with its dividend history. With just one exception, ONT has increased its annual dividend every year since listing on the ASX. At current prices, ONT offers investors an attractive fully franked yield of about 4.8 per cent.
With a view towards longer-term value creation, ONT remains well placed to deliver a growing stream of earnings and dividends to patient investors over the coming years.
Originally published in The Australian.