This article was written by our regular contributor Anton Crabbe. You can read his bio here
It has been amended from original publication to include a recent update from the business. All changes are in the Outlook section below.
Pacific Smiles (ASX:PSQ) is the largest branded Dentist Service Organisation in Australia. With 130 dental centres across Australia and plans for more to come. They own and operate 11 NIB Dental Care centres and in July 2020 signed a 10-year Managed Services Agreement with health fund HBF. Under this agreement PSQ operates dental centres in Western Australia, on behalf of HBF, for a fee. Their business model is a mix of a franchise model and a service-provider model offering a range of dental services such as general, cosmetic, and restorative dentistry to various segments of the market, including adults, children, and seniors.
PSQ doesn't directly employ dentists, rather it collaborates with independent dentists, operating as a support organisation. The model is designed to attract high-quality dentists by offering them modern facilities, administrative support, marketing, and an existing customer base. This allows the dentists to focus on providing dental services while PSQ manages the business aspects of the clinics.
It comes as no surprise that according to PSQ’s FY22 annual report the bulk of their $139.0m in revenue come from contracts and customers ($138.0m). COVID negatively impacted PSQ’s business as patient deferred dental visits and as a result revenue, earnings and profits all declined, but with COVID behind them, PSQ believes they are in the box seat to grow their business by capitalising on industry tail winds and helping to consolidate the industry.
StockRank:
Given PSQ’s poor performance in FY22 where revenue declined from $153m to $139m, and reported negative operating profit, it’s not surprising to see their current StockRank down at 60. The poor fiscal performance has affected their quality (68), value (36) and momentum (66) too.
When we look back at their StockRank pre-COVID on the 30th June 2019, it’s a very different story. PSQ were flying high with an overall StockRank of 81 with quality (89), value (54), and momentum (72), all higher on the back…
