Top Stocks 2019: A Sharebuyer’s Guide to Leading Australian Companies by Martin Roth

Part I
 The companies

1300SMILES Limited

has also expanded to 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 2018, full year)
 A series of newly acquired dentistry practices joining the company helped
 1300SMILES to a firm rise in revenues and profits. However, expenses
 associated with the acquisitions meant that revenues rose at a faster rate
 than earnings. The company also reported 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 rose to $55.8 million in June 2018, from $51 million in
 the previous year.
 Outlook
 The dental business in Australia is fragmented, with a majority of dentists
 working in their own private practices. A gradual consolidation is taking
 place, which has led to the rise of what has become known as the Dental
 Service Organisations sector, 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 also provides support staff, equipment and facilities and
 sources all consumable goods. It continues to seek out new practices to buy,
 though it has strict benchmarks concerning the price it will pay. At the end
 of the June 2017 year it acquired two large orthodontic practices in New
 South Wales, then during the June 2018 year it acquired five practices in
 Queensland and launched a large new greenfield site in the state. This was
 followed by a further acquisition in Queensland in July 2018. All these
 businesses are expected to contribute to growth during the June 2019 year.
 However, the company has expressed concern that as the Dental Service
 Organisations sector evolves in Australia it faces conflicts of interest with
 some of the health funds, which, it claims, at times appear to be seeking a

Top Stocks 2019: A Sharebuyer’s Guide to Leading Australian Companies by Martin Roth