Dental group Pacific Smiles Group Ltd (ASX: PSQ) listed on the ASX in November last year at $1.30 – today they trade around $2.08, up another 3.5% in early trading.
Half year results released today justify the company's high P/E ratio, with strong growth across all metrics. Here's a quick summary:
- Revenues up 30.3% to $37.6 million.
- Same centre patient fees growth of 6%
- Net profit rose 18.6% to $5 million
- Net cash of $12.5 million
- Fully franked dividend of 1.67 cents per share declared
Pacific Smiles opened 4 new dental centres during the half and now runs 45 centres, although around one third are less than 3 years old. As centres mature, they become more profitable. A further 6-8 centres are expected to open this financial year – although new centres take time to contribute to profit, and can weigh on earnings in the short term.
The company also says it has seen strong same centre patient growth of 6.2% since the beginning of the calendar year. Pacific Smiles also says it remains confident of achieving its prospectus forecasts.
An interesting exercise may be to compare Pacific Smiles half year results to another listed dental group 1300 Smiles Limited (ASX: ONT).
| Pacific Smiles | 1300 Smiles | |
| Locations | Qld, NSW, ACT & VIC | QLD, SA & NSW |
| Centres | 45 | 24 |
| Revenues ($m) | 37.6 | 17.6 |
| revenue per centre ($m) | 0.8 | 0.7 |
| net profit ($m) | 5.0 | 3.4 |
| profit margin | 13.3% | 19.2% |
| earnings per share (cents) | 3.60 | 14.29 |
| market cap ($m) | 322.4 | 155.5 |
| share price ($) | 2.03 | 7.00 |
| P/E ratio (x) | 32.2 | 23.0 |
| dividend (cps) | 1.67 | 9.00 |
| annualised dividend yield (%) | 1.6% | 2.6% |
Source: Half year company reports
On those very rough numbers, 1300 Smiles looks to be cheaper, with higher profit margins and a better dividend yield, although both companies are generating strong growth. 1300 Smiles saw net profit rise 33.6% while Pacific Smiles recorded 18.6% growth.
Foolish investors may want to add both to their watchlist. Operating in a highly fragmented market, there is plenty of scope for both companies to grow strongly.
