Rentals for dentals: Healthcare business takes root and grows through lockdowns

Rentals for dentals: Healthcare business takes root and grows through lockdowns

Date of Report: Market close on Tuesday, 23rd November
ASX: PSQPrice: A$2.980

52 Week Range: $1.900 - 3.080

Market Cap: $475.55 million

Sector: Health Care Equipment & Services

Every second week we invite a leading fund manager to present at The Insider: Meet the Fund Manager. In January, Joel Fleming, from Yarra Capital, selected Pacific Smiles Group as one of his three favourite stocks amid a period of significant growth for the business.

January 29, 2021

September 29, 2021

The Insider: Meet the Fund Manager sessions are a great way to hear directly from leading fund managers. They share their approach to investing, favourite companies and their market view for the year ahead.

The Insider: Meet the CEO sessions feature a selection of company leaders who provide a succinct overview of big things their companies are doing. 

Coming out of lockdown is giving businesses and consumers alike more reasons to smile. Among one of those businesses Pacific Smiles Group, noted by fund manager Joel Fleming for its stand-out business model and significant growth potential.

The company is an independent operator of dental centres in Australia providing dentists with services and facilities to conduct their practices – effectively bringing the idea of a ‘coworking space’ to dental professionals.

Mr Fleming says, “[Pacific Smiles] is a business that is trying to grow its footprint, take market share and become a pre-eminent dental provider in Australia.” He added that the business was well-positioned amid the backdrop of merger and acquisition activity and the relationship with health funds.

Pacific Smiles’ CEO, Phil McKenzie, joined the company with a mandate for growth which, evidently, has resulted in the company operating out of 112 locations and claiming a 2.5% market share out of Australia’s ~$10 billion dental industry.

“In simple terms, our true purpose is to improve the oral health of all Australians to be the world’s best,” said Mr McKenzie speaking to Reach Markets.

Pacific Smiles thinks they can achieve this through their differentiating factor – a growth strategy highlighted by greenfield rollouts.

Along with signing up recently graduated dentists into its development program, Pacific Smiles’ growth strategy is also highlighted by their relationship with health insurance company, HBF – who appointed Pacific Smiles as their preferred supplier to open and operate HBF dental centres over a 10+10 year period.

Despite the effects of the pandemic, the company recorded $14 million in net profits after tax, a 72.8% improvement, and distributed a 2.4 cent dividend per share while also facilitating skills and leadership training to prepare for a planned 10-15 new dental centres.

With long term objectives of opening approximately 250 dental centres and 800 chairs, Mr KcKenzie is confident that they have “a stable business” that can meet the market’s demands in terms of regulations and technology requirements.

Joel Fleming sums up the company’s potential stating, “There’s a significant long-term opportunity for them to scale the brand, work more closely with health funds to become a supplier of choice.”

Click here to view more videos from Joel Fleming’s ‘Meet the Fund Manager’ session, or click here to view the full ‘The Insider: Meet the CEOs’ session.

The CEOs of all the companies chosen as Fund Manager favourite stocks are invited to present at our Meet the CEO series. Reach does not assume responsibility for the accuracy or completeness of any information provided, and the views expressed are not reflective of Reach Markets position.

Any advice contained within this presentation is general advice and does not consider your personal circumstance, you should consider whether it’s appropriate for you.

The information we are giving you is for educational purposes only. “Investing is about understanding your risk” and every time you invest in the share market there is a risk of loss.

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Joseph ConstableNon Executive Director and Portfolio ManagerHGL Limited (Hancock & Gore)

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The CEOs of all the companies chosen as Fund Manager favourite stocks are invited to present at our Meet the CEO series. Reach does not assume responsibility for the accuracy or completeness of any information provided, and the views expressed are not reflective of Reach Markets position.
Any advice contained within this presentation is general advice and does not consider your personal circumstance, you should consider whether it’s appropriate for you.
The information we are giving you is for educational purposes only. “Investing is about understanding your risk” and every time you invest in the share market there is a risk of loss.