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Why the 1300 Smiles share price looks on an upward trajectory

Tom Richardson
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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 $5.7 million, up 7.1%
  • 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.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019