Top Stocks 2021 by Martin Roth

PART I
 THE COMPANIES

1300SMILES Limited
 ASX code: ONT

Townsville‐based 1300SMILES, founded in 2000, runs a chain of some 35
 dental practices in 10 major population centres of Queensland and in South
 Australia and New South Wales. Its main role is the provision of dental
 surgeries and practice management services to self‐employed dentists,
 allowing them to focus on dental services. It also manages its own small
 dental business. The founder and managing director, Dr Daryl Holmes,
 owns around 60 per cent of the company equity.
 Latest business results (June 2020, full year)
 1300SMILES was hit by the COVID‐19 pandemic, with many of its clinics
 forced to close temporarily for some weeks between March and May 2020,
 while activities at other clinics were severely limited. This led to a decline
 in revenues and profits for the year, despite a rebound in June 2020, which
 generated the company's highest‐ever monthly revenues figure. The
 company also reports what it calls over‐the‐counter revenues, which
 represent the amount actually received by its dentistry businesses before the
 deduction of patient fees by self‐employed dentists. On this basis — which
 the company believes gives a fairer measure of the scale of its operations
 than its reported statutory sales figure — total company revenues fell 3 per
 cent to $57.1 million. During the year the company acquired new multi
dentist practices in Gatton and in Laidley, both in Queensland. It sold two
 smaller operations.
 Outlook
 The dental business in Australia is fragmented, with around 70 per cent of
 dentists working in their own private practices or in small partnerships.
 However, as stricter regulatory and compliance requirements drive up costs,
 a gradual consolidation is taking place, and 1300SMILES is one of the
 leaders in this trend. The company buys dental practices, then retains the
 dentists, who pay a fee to 1300SMILES for services received, including
 marketing, administration, billing and collection, facilities certification and
 licensing. The company continues to seek out new practices to buy, though
 it was unsuccessful late in 2019 in its attempt to acquire a much larger rival,
 Albano, which manages the Maven chain of practices. It has taken a small
 stake in the ASX‐listed Smiles Inclusive. 1300SMILES believes that, after

Top Stocks 2021 by Martin Roth