# ONT - 1300 Smiles



## System (1 August 2010)

1300 Smiles Limited (ONT), formerly known as Townsville Family Dental Pty Ltd, provides dental surgeries, practice management and other administrative services to self employed dentists. It also provides general dentistry services to patients. The services provided by the company allow dentists to focus on the delivery of dental services rather than on the administrative aspects of carrying on their businesses.

http://www.1300smiles.com.au


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## ROE (3 August 2010)

Wonder when this stock will show up on here
i'm a shareholder..awesome business...excellent capital management ....strong return on capital....dividend increase each year
and this year tip for another double digit growth


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## robusta (3 August 2010)

I agree ONT I think we chatted about this one around 6 months ago.

I locked and loaded and filled up all I could get under $3.00 as per your opinion. Very happy to hold this one for the long term - it is now my 3rd largest holding.

The annual reports are a joy to read and love the capital management.

Thank you again ROE


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## ROE (3 August 2010)

That the way I like buying stocks 
Few superb business the super star of asx but big position in each one that way it force you to be disciplined do plenty of research before capital is committed.....

The business I like best are the one that made 20 cents and I can take all the 20 cents out and put in my pocket.. Sound like nvt  

When I find these business on the cheap I load it up regardless of law suit, negative news and crazy headlines because when the bad news are over it continue to deliver me that 20 cents and maybe a bit more


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## ROE (19 August 2010)

another year another increase payout, 6th year straight and counting, Another year to sit on my ass 

if you own this stock remmeber to write email to Uncle "Dr Daryl Holmes" and thanks him for another awesome year

and tell him what a wonderful job he have done and the disciplines he put in place to allocate capital only to get high return

I did last year, I will do the same this year...

Dear Shareholder, 

It is my privilege to present to you the sixth Annual Report of 1300SMILES Limited. The full year ended 30 June 2010 
was outstanding, with record results on all significant measures. We finished the year with our biggest profit ever, and 
we're starting the 2011 year with the largest established business we've ever had. 

One result in particular leaps out at me:  over the two years since the 2008 year, our Net Profit After Tax (NPAT) has 
come within a whisker of doubling, up 98%.  Staying with this two year view for a moment, since the 2008 year we have 
also seen Total Revenue rise by 54%, Earnings Per Share (EPS) by 93%, and Earnings Before Interest and Tax (EBIT) 
by 97%. 

Shareholders will recall that our 2009 report reflected a substantial step upward to a much larger base business, with 
exceptional increases in NPAT and EPS.  The 2010 results show that that we have successfully adapted to our greatly 
increased scale, as we have delivered more moderate but strongly positive progress on the key measures of interest to 
shareholders.  

Financial Results for the year ended 30 June 2010 

Compared to those of the previous year, the key results for the year to 30 June 2010 were as follows: 

NPBT up 19.0% to $6.2 million   

Earnings per share up 12.3% to 21.0c per share   

NPAT up 13.6% to $4.3 million   

Final fully franked dividend up 20% to 7.2c per share   

EBITDA up 14.8% to $7.4 million   

Retained Profits up 40.9% to $6.2 million


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## So_Cynical (19 August 2010)

ROE said:


> Final fully franked dividend up 20% to 7.2c per share
> 
> Retained Profits up 40.9% to $6.2 million




At today's closing share price ONT is yielding 5.65% gross (approx) so perhaps fair to say the stock is near the top of its range based on yield, considering the Market cap and the small amounts of money it deals in....many investors/funds etc just wont touch small caps.

Still there delivering growth and profit and that's what any investor wants..still wont surprise me to see this go sideways for a while...like JBH has done for 7 months.


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## ROE (19 August 2010)

No idea I let people time the market when to jump in and out 

most stocks I hold dividend just increase each year while I sit around
and do nothing.

I don't buy stock just based on yield, it's a lot of factors that make up the intrinsic value

Bigger yield always helps but sometimes you enter it with 3% and end up with 15% yield because the intrinsic values of wonderful business will gives it the ability to increase its dividend payment over time.

If you buy ONT your return on dividend alone now nearly pay for the initial investment.
and that just 5-6 years ago ....not many business can deliver such stunning result....another 5 years the dividend alone will double initial investment and when a business deliver such awesome results you should see the unrival capital appreciation that goes with it..

during this time ASX (2005-Present) return 4% .... ONT return 300% .... talk about super stars
there are only a handful of superstars on the ASX, when I spot them I put all my eggs in that basket 

Uncle Warren Once Said

Time is the friend of the wonderful business. It's the enemy of the lousy business. If you're in a lousy business for a long time, you're going to get a lousy result, even if you buy it cheap. If you're in a wonderful business for a long time, even if you pay a little too much going in, you're going to get a wonderful result if you stay in a long time.

Compared ONT and lousy PRY where fund mangers love them and you see which is a lousy business and which is a wonderful business


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## molar (27 December 2010)

ROE said:


> No idea I let people time the market when to jump in and out
> 
> most stocks I hold dividend just increase each year while I sit around
> and do nothing.
> ...




Did a search on google re:ONT and came across this site.  Had to register to be able to contribute so I hope you guys are smart enough to take some advice while you have still have time.  I am guessing share price may still have a few years to run but this is not a long term company!
First of all read the managing directors annual report it is available thru the ASX site online.
The managing director warns against companies that are buying up high grossing self managed practices of "super" dentists and reporting there profits as the companies profits.
 What these companies do is they offer these dentists a purchase price which cannot be refused.  The dentist is offered an amount that is 3-4 times the value for which they could sell to collegues.  The capital gains tax concessions mean the dentist has huge incentive to take the deal.  Part of the contract is the dentist must continue to work for 2-5 years.  Effectively the dentist has taken his next 5 years "wages"as a capital payout which maybe tax free or 50% discounted.  These dentists work out the contract and leave!  The company reports great profit while they are there but is building up a balance sheet of grossly overvalued "goodwill"  There is no goodwill it leaves with the key dentist/s. 
1300smiles MD warns about this in his annual address but it is exactly what his company is doing.  A total confidence trick on his part.  
1300 even renegotiating sales contracts after dentists have failed to meet their earn out provisions so that they can continue to capitilise their (dentist wage) expenses and report great revenue.
As the practices they have bought lose the key dentists they replace them with foreign dentists many of them "straight off the boat " and the individual practice profitablility crashes to barely break-even as these dentists in many cases burn up the remaining "location"goodwill with high fee's and inaptitude.  To keep reporting revenue growth they buy up more super performing practices practices about 1-2 per year and in this way keep there revenue growth. 
The MD says in his report that "it is not practical to report profitability of individual practices because they cannot accurately apportion the costs of the centre management in Townsville"  This is rubbish they provide individual profit reports to the practice managers.  If this data was released to the Market it would show that they are progressively running the high performing practices they have bought into the ground.
If you doubt the veracity of this post look up the Mackay practice on the 1300 website (all indian names) about 4-5 years post purchase.  I suggest at the next share holder meeting you ask for some indivdual practice figures.  You will see the pattern the high profit practices are the ones they haven't had control of for long.
The above is the informed opinion of one person only
Take it or leave it my friends


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## robusta (29 December 2010)

molar said:


> Did a search on google re:ONT and came across this site.  Had to register to be able to contribute so I hope you guys are smart enough to take some advice while you have still have time.  I am guessing share price may still have a few years to run but this is not a long term company!
> First of all read the managing directors annual report it is available thru the ASX site online.
> The managing director warns against companies that are buying up high grossing self managed practices of "super" dentists and reporting there profits as the companies profits.
> What these companies do is they offer these dentists a purchase price which cannot be refused.  The dentist is offered an amount that is 3-4 times the value for which they could sell to collegues.  The capital gains tax concessions mean the dentist has huge incentive to take the deal.  Part of the contract is the dentist must continue to work for 2-5 years.  Effectively the dentist has taken his next 5 years "wages"as a capital payout which maybe tax free or 50% discounted.  These dentists work out the contract and leave!  The company reports great profit while they are there but is building up a balance sheet of grossly overvalued "goodwill"  There is no goodwill it leaves with the key dentist/s.
> 1300smiles MD warns about this in his annual address but it is exactly what his company is doing.  A total confidence trick on his part.




This would be the opposite of what ONT has done in the past, they have a stated policy of not over paying for new practices and past performance seems to back this up.



molar said:


> 1300 even renegotiating sales contracts after dentists have failed to meet their earn out provisions so that they can continue to capitilise their (dentist wage) expenses and report great revenue.
> As the practices they have bought lose the key dentists they replace them with foreign dentists many of them "straight off the boat " and the individual practice profitablility crashes to barely break-even as these dentists in many cases burn up the remaining "location"goodwill with high fee's and inaptitude.  To keep reporting revenue growth they buy up more super performing practices practices about 1-2 per year and in this way keep there revenue growth.




ONT seem to add more chairs to aquired practices and also open up 'greenfield' new practices.



molar said:


> The MD says in his report that "it is not practical to report profitability of individual practices because they cannot accurately apportion the costs of the centre management in Townsville"  This is rubbish they provide individual profit reports to the practice managers.  If this data was released to the Market it would show that they are progressively running the high performing practices they have bought into the ground.
> If you doubt the veracity of this post look up the Mackay practice on the 1300 website (all indian names) about 4-5 years post purchase.




There is a national shortage of dentists as with doctors, look up your local phone book you will find a fair % of Indian names at most medical centres.



molar said:


> I suggest at the next share holder meeting you ask for some indivdual practice figures.  You will see the pattern the high profit practices are the ones they haven't had control of for long.
> The above is the informed opinion of one person only
> Take it or leave it my friends





Interesting post and if true ONT should have a steeply declining ROE and significanly higher debt, I will watch with interest but continue to hold.


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## So_Cynical (30 December 2010)

molar said:


> Did a search on google re:ONT and came across this site.  Had to register to be able to contribute so I hope you guys are smart enough to take some advice while you have still have time....all bad news etc
> The above is the informed opinion of one person only
> Take it or leave it my friends




Interesting molar...thanks, you have sparked my curiosity.



robusta said:


> This would be the opposite of what ONT has done in the past, they have a stated policy of not over paying for new practices and past performance seems to back this up.




So i read thru the last ASX announcement (Managing Directors address to Annual General Meeting) and i couldn't help but think it was all a bit of a sales pitch, lots of positive speak and mention of happy customers and happy dentists, low cost organic growth and extra chairs etc...low debt, EPS growth and dividends but no details, no nitty gritty. i was almost expecting to scroll down the page and be offered a free set of steak knifes if i was in the first hundred callers.

Outa curiosity ive looked at a few acquisition announcements and they all seem to be a little lite on detail....price and terms.

Bundaberg http://www.1300smiles.com.au/storage/20080627 ONT acquisition Bundaberg.pdf

Toowoomba acquisition and completion and no mention of money
http://www.1300smiles.com.au/storage/18-2-08 Acquisition of Toowoomba practice.pdf
http://www.1300smiles.com.au/storage/Twba Acq'n Completion - 18 Apr'08.pdf

I hold alot of stocks and im reasonably confident that when they buy or sell something they general say how much and in general what the terms were...seems strange that ONT don't.

Turns out the acquisition dollars eventually do get a mention in the annual report (page 33)
http://www.1300smiles.com.au/storage/1300SMILES Annual Report 2008 .pdf




robusta said:


> There is a national shortage of dentists as with doctors, look up your local phone book you will find a fair % of Indian names at most medical centres.




Ill quote from page 31 of this June 2010 Govt document (Skill Shortages Australia)

Dentist - Regional Shortage 


> Employers in rural and regional Australia experienced significant difficulty attracting staff. Shortages of dentists are evident in regional areas in most states but employers in metropolitan locations experienced little difficulty filling their vacancies for dentists.




http://www.deewr.gov.au/Employment/LMI/SkillShortages/Documents/NationalSkillShortageReport.pdf



robusta said:


> Interesting post and if true ONT should have a steeply declining ROE and significanly higher debt, I will watch with interest but continue to hold.




I find it a little strange how ONT have deliberately pitched there company to Value investors, Buffet even gets a mention in the 2008 annual report. :dunno:


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## skc (30 December 2010)

When a company relies on the service of highly educated professionals who are usually pretty smart and have more loyalty to their profession than their employer/company, the risk of them leaving is always significant.

There is no doubt some company does it better/worse than others.

RHC has increased profits year after year.
PRY has mis-treated their GPs and their GP clinic profitabilities are way down.
VGH is similar to ONT except they do eyes instead of teeth. Just have a look at their share price chart since 2005!

The lack of disclosure in acquisition of individual practices imo is fair enough. Some practices are 1-2 people and they probably don't like to have their finances disclosed to the whole industry.

Everything Molar raised are potential concerns, but if they are true there would be evidences in the numbers... falling ROE, falling revenue per practices etc. Anyone care to dig them out??


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## frankbaozhu (30 December 2010)

molar said:


> Did a search on google re:ONT and came across this site.  Had to register to be able to contribute so I hope you guys are smart enough to take some advice while you have still have time.  I am guessing share price may still have a few years to run but this is not a long term company!
> First of all read the managing directors annual report it is available thru the ASX site online.
> The managing director warns against companies that are buying up high grossing self managed practices of "super" dentists and reporting there profits as the companies profits.
> What these companies do is they offer these dentists a purchase price which cannot be refused.  The dentist is offered an amount that is 3-4 times the value for which they could sell to collegues.  The capital gains tax concessions mean the dentist has huge incentive to take the deal.  Part of the contract is the dentist must continue to work for 2-5 years.  Effectively the dentist has taken his next 5 years "wages"as a capital payout which maybe tax free or 50% discounted.  These dentists work out the contract and leave!  The company reports great profit while they are there but is building up a balance sheet of grossly overvalued "goodwill"  There is no goodwill it leaves with the key dentist/s.
> ...





As outsiders, it is impossible to tell what exactly is going on in the business. If you believe we need to know the business inside-out to make an investment, it is almost impossible to ever put money in any stocks, unless you are an insider. Therefore, when investing in businesses, we have to be reasonably sure about the integrity of the management and the quality of businesses.

That being said, without being an insider, what we said here are mostly guesstimates and speculations. Molar, I think your comments are intriguing. But I was wondering of the many claims you had, how much of them was supported by facts? You said the company is overpaying for the clinics, do you have any hard evidences to support your claim? And I was also wondering other than Mackay your mentioned, do you have first-hand data of all clinics to support your arguments? It seems to me you are confused about opinions and facts.

Here are my questions and hopefully you can answer them:

_"1300 even renegotiating sales contracts after dentists have failed to meet their earn out provisions so that they can continue to capitilise their (dentist wage) expenses and report great revenue."_

Based on your comments, you are probably reasonably sure about your assertions. Do you have any facts behind them?

_"As the practices they have bought lose the key dentists they replace them with foreign dentists many of them "straight off the boat " and the individual practice profitablility crashes to barely break-even as these dentists in many cases burn up the remaining "location"goodwill with high fee's and inaptitude.  To keep reporting revenue growth they buy up more super performing practices practices about 1-2 per year and in this way keep there revenue growth. "_

Again, if ONT never revealed the specific numbers for their clinics, how did you know the profitability of them? In addition, there is nothing wrong hiring qualified foreign doctors since they are of equal quality and less costs. Why would you think hiring them is a burn-up of location goodwill? And also the last sentence, I would like to hear your analysis on the financials.

_"The MD says in his report that "it is not practical to report profitability of individual practices because they cannot accurately apportion the costs of the centre management in Townsville"  This is rubbish they provide individual profit reports to the practice managers.  If this data was released to the Market it would show that they are progressively running the high performing practices they have bought into the ground."_

OK, this one is a bit outrageous. It is common sense that if you run a company with many individual profit center or subsidiaries, you have the segment reporting that lists corporate expense to offset the profits generated in the subsidiaries. I have read thousands of financial reports and I have never seen anyone raised the questions about the expenses on the corporate level. Think about it, if ONT hires people in the headquarter, is it going to charge individual profit center? Or if the HQ buys office supplies, should it charge individually? It states very clear in the AR the HQ provides all necessary services to the clinics so the doctors can focus on their patients. What is wrong with that?

_"If you doubt the veracity of this post look up the Mackay practice on the 1300 website (all indian names) about 4-5 years post purchase.  I suggest at the next share holder meeting you ask for some indivdual practice figures.  You will see the pattern the high profit practices are the ones they haven't had control of for long.
The above is the informed opinion of one person only
Take it or leave it my friends"_

So what is wrong about Indian doctors? Are the inferior to white doctors? Or they are less qualified? You are misleading the readers using irrelevant facts. 

*Personally, I really doubt your opinions are informed or they were supported by hard facts. Guesses and speculations are good starts to an investment, but in no way they should be abused to blast a company you have not thorough understanding. *

Maybe I sound very personal here, but I really hope my questions can be answered and misconceptions can be corrected. Molar, with all due respect, please let me what you think of my comments.

Fan


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## frankbaozhu (30 December 2010)

As I said, I have researched many companies worldwide and I know ONT is a special one after reading the AR for 5 mins. Here are a few facts that you guys would want to know.

Use google map to look at the HQ. And you would not believe your eyes. It is located in the old 2-story building and the ground floor was leased out. Last year ONT earned 4.3 million on 22 million revenue, you must be wondering how come the margin is so high.

The pay for all directors and executives are the lowest I have seen after reading 200+ annual reports in Austrilia companies. With 6 years of profit growth, last year top management and directors as a whole were paid less than 300,000. That is less than 50K per person!! Can you guys pinpoint any company with simliar profitability paying so little to its MD and majority owner?

1300 has also 0 stock options while unprofitable companies giving millions of options to insiders. How many percent of companies listing in Australia do not issues options?

When I look at companies, I look at what management does instead of what they say. If MD wants to pump the share price by misinforming investors, why he never sold a single share? Why would he not have a better office? Why would he just issue a lot of options to himself, since any option plan will be passed for sure. Why would he pay a lot more to himself? And why on the earth MD is still spending half a day treating patients after becoming a mulit-millionaire?

I guess self-claimed "informed opinions" just matter a lot more to people who need opinions.

Fan


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## So_Cynical (30 December 2010)

frankbaozhu said:


> When I look at companies, I look at what management does instead of what they say. If MD wants to pump the share price by misinforming investors, why he never sold a single share? Why would he not have a better office? Why would he just issue a lot of options to himself, since any option plan will be passed for sure. Why would he pay a lot more to himself? And why on the earth MD is still spending half a day treating patients after becoming a mulit-millionaire?
> 
> I guess self-claimed "informed opinions" just matter a lot more to people who need opinions.
> 
> Fan




Your coming across as quite a fan boi there Fan ...Have you considered why the good Dr Holmes has done so much to appeal to "value" investors? whats in it for him?

Dr Holmes owns 68% of ONT and the top 20 hold 87% so who really benefits the most from the SP going up? if we take it for granted that the top 20 are net holders of ONT then its the holders of the other 17% doing the bulk of the trading...value investors and punters running the price up.

Its a given that the bulk of the buyers are value investors buying because ONT ticks all the "value" boxes...assuming the Dr has held his shares since the float at 80c he is now sitting on a windfall 400% profit not including all them juicy dividends....also interesting to note form this years annual report is the fact that escrow is the 2nd biggest holder of ONT shares..847000 shares sitting in escrow, im assuming these shares are held by dentists they brought out and thus needed to hang around.

Its a great plan when you think about it....a decade of buying 2 or 3 new dental practices per year and issuing 200K or so new shares for each practice and then justifying this to the value brigade as earnings positive and a very minor dilution, all the while upping the divi every year with most of it going into the largest holders pocket..more value punters getting on board every year while the MC & SP just keep on climbing to the over whelming benefit of just one man.....its a great plan.


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## frankbaozhu (30 December 2010)

So_Cynical said:


> Your coming across as quite a fan boi there Fan ...Have you considered why the good Dr Holmes has done so much to appeal to "value" investors? whats in it for him?
> 
> Dr Holmes owns 68% of ONT and the top 20 hold 87% so who really benefits the most from the SP going up? if we take it for granted that the top 20 are net holders of ONT then its the holders of the other 17% doing the bulk of the trading...value investors and punters running the price up.
> 
> ...




To be honest I just did not get your point here. As a shareholder, you benefit as much from the increasing dividend as the biggest shareholder. If you argue otherwise, I would say that every share has equal rights to a small part of the company have not registered in your mind. If the share price going up every year, does it matter if it was done by value investors or speculators? If you have been a shareholder holding 100 shares since the listing, you would make the exact same percentage as MD.

A big difference has to be made between shares given when the acquirer is not a public company and when the acquirer is already a public company. It is hard to tell if ONT forced the doctors accept the shares as payment, but those are directly from annual report:

_"Ordinary shares were allotted during the year pursuant to 
the Bundaberg acquisition agreement on the practice 
meeting revenue and earnings targets. 
The company allotted (i) 43,103 fully paid ordinary shares 
at $2.90, with no shares held in escrow, and (ii) 50,000 
fully paid ordinary shares at $2.50 with shares held in 
voluntary escrow for 3 years and one third being released 
from escrow annually. "_

Let me assume the 50000 shares were taken by the seller unwillingly in the transaction, and they really wanted the cash. But look at this one directly from 2008 annual report:

_"Included in sundry creditors is a Deferred settlement of $782,523 on the purchase of the Bundaberg practice. By way 
of consideration the Company will allot shares under escrow, ex-dividend with the number of shares based on the 
greater of:
a) The volume weighted average price for the 6 month period up to 30 June 2008; or
b) A share price of $2.75 per share 
Further Deferred settlement of $1,636,697 for the Bundaberg practice is payable over the next 5 years with the last 
instalment due September 2012 upon certain revenue and profit benchmarks being reached"_

So the doctors screwing around because of 125K dollars in the escrow shares while they got paid 2.5 million in the sale? What kind of logic they have?

Let's look at the majority of escrow shares you mentioned. Directly from annual reports:

_"Ordinary shares were allotted during the year pursuant to 
a company loan funded program to incentivise senior 
management and consultants. The company allotted 
566,000 ordinary shares at $2.65 and 120,000 ordinary 
shares at $2.70. Shares are held in voluntary escrow with 
approximately even release from escrow until 2015.  
The company loans are unsecured. Should the 
shareholder sell down shares a proportionate percentage 
of the outstanding loan is required to be repaid. Interest 
on loans is charged on commercial terms.  "_

So all the shares were issued voluntarily *this year* to incentivize management and doctors. And for the privilege to hold the shares, doctors have to pay 6-7% on the interest from their own pocket and if the price of the shares go down, they will probably lose a lot. Why those fat cats want to take such an arrangement? They have got all they want in the sale, why would they want to hang around just for the escrow shares?

As for your great plan comments, it makes me wonder if you live in a world of conspiracy. Earnings up, share price up, dividend up and you are saying it is because the insiders wanted to enrich themselves? And I was wondering, how did you know the details of the great plan? For one, your math is not incorrect. If you buy 2 or 3 new practices every year, you will not be able to sustain your growth rate. Second, ONT has paid cash in majority of the transactions. How do you know they are going to pay 200k shares in future transactions? And the comment about dividends just showed your total ignorance about investing. If every single share was paid the same amount of dividend, how can you accuse someone benefitting more simply because he has more shares? If what you said is true, then most of the CEOs with significant holdings in his own company are just hypocrites. That is because all they want is to get revenue up, EPS up, dividend up and make big bucks along with fellow shareholders. What is wrong with that? 

Corrections about comments I made, the CEO did sell shares in 2005 and 2009. My apology.

Fan


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## Billyb (30 December 2010)

1300 as a Dental Practice has issues. The question is whether these issues will affect 1300 as a Business.
Practice Managers are told to keep it tight. This results in cutting corners, cheaper materials, lower treatment quality and ultimately dissatisfied dentists and patients. They often don't provide enough time for dentists to do good work, because they keep trying to squeeze patients in for more $$$. Dissatisfied dentists means high turnover of dentists, which means loss of patient loyalty. These patients then go to private dentists where they can get some stable treatment . Ultimately leading to less EPS for 1300.


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## molar (30 December 2010)

frankbaozhu said:


> As outsiders, it is impossible to tell what exactly is going on in the business. If you believe we need to know the business inside-out to make an investment, it is almost impossible to ever put money in any stocks, unless you are an insider. Therefore, when investing in businesses, we have to be reasonably sure about the integrity of the management and the quality of businesses.
> 
> That being said, without being an insider, what we said here are mostly guesstimates and speculations. Molar, I think your comments are intriguing. But I was wondering of the many claims you had, how much of them was supported by facts? You said the company is overpaying for the clinics, do you have any hard evidences to support your claim? And I was also wondering other than Mackay your mentioned, do you have first-hand data of all clinics to support your arguments? It seems to me you are confused about opinions and facts.
> 
> ...




Fan or is it Dr Fan,
                         How's the weather in Townsville.  Cowboys shaping upfor a good 2011?
You are coming across as very confrontational.  Maybe you have 70 million reasons why don't want these questions to be asked?

I don't have to prove anything.  You can listen to me or not listen to me won't make one IOTA of difference to me.
If you do have money in there (and you are not the MD himself) then you should ask the following questions!
1.  How much cash and shares are 1300smiles paying for these practices that they buy?
2. Are these contracts conditional on the dentist working for 3-5 years in the practice? ie the purchase price paid for the practice has capitilsed part of the expense for that dentists wages for the next 3-5 years.
3.  Why won't management release the figures for individual practices? Is it true that the individual practice profitability Is falling once the original dentists leave, despite introducing increased chair numbers?  Is the growth in total business earnings made up by buying more high end practices whatever the cost so that their earnings can be reported as profit! and the overall company report great revenue growth?
4.  Graham Middleton is an accountant at a company called Synstrat he has extensive experience in valuing dental practices and writes in the ADA federal newsletter.  If you want investment advice on this company or any other dental company track him down!
5.  If as the MD says in his report 1300 is so great at running dental practices are they attracting Australian trained graduates of any nationality or are they taking applicants who would work anywhere for an Autralian VISA.  
6.  Are 1300 smiles patients happy? Can the company provide any survey data to support this taken from one of the practices after the selling dentist has left and 1300 management has moved in?
7.  What percentage of dentists now working for 1300smiles have been there for longer than 12 mths?

The number one question is " Is the business being run to be a long term profitable business or is the number one goal to report revenue growth and thus increase the SP."

cheers
NOT A FAN


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## frankbaozhu (31 December 2010)

Molar, I apologize being confrontational. If you have posted your questions instead of outright assertions in the previous post, I would not have had to make my point so strongly. 

The questions you mentioned are all good ones. It seems worthwhile to do a thorough investigation towards your concerns and I will get back to you when I have the answer, though there are quite a lot of them I can only guess.

And FYI, I am neither a doctor or an insider. I am not interested in defending the company as well. The only thing I want to do is to make this thread a fair ground for all of us to post well-thought and well-reasoned opinions and hard facts.

Fan


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## frankbaozhu (31 December 2010)

Billyb said:


> 1300 as a Dental Practice has issues. The question is whether these issues will affect 1300 as a Business.
> Practice Managers are told to keep it tight. This results in cutting corners, cheaper materials, lower treatment quality and ultimately dissatisfied dentists and patients. They often don't provide enough time for dentists to do good work, because they keep trying to squeeze patients in for more $$$. Dissatisfied dentists means high turnover of dentists, which means loss of patient loyalty. These patients then go to private dentists where they can get some stable treatment . Ultimately leading to less EPS for 1300.




I guess if you dare to make those statements publicly instead of posting it on a forum, you will be sued like hell for libel. Why you did not make your comments using your original ID? Afraid of something?


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## prawn_86 (31 December 2010)

This thread has a heap of good info from both sides. Lets please stick to the facts and (reasoned) opinions without being confrontational or baiting each other. 




frankbaozhu said:


> I guess if you dare to make those statements publicly instead of posting it on a forum, you will be sued like hell for libel. Why you did not make your comments using your original ID? Afraid of something?




Further posts like this will be removed and infracted as they add nothing to a thread. I do not see how someone expressing their opinion can be sued, otherwise every AGM would result in court cases. Anyway, a company with more than 5 (i think) staff cannot sue an individual for defamation.

Keep the thread on track please guys


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## molar (31 December 2010)

frankbaozhu said:


> I guess if you dare to make those statements publicly instead of posting it on a forum, you will be sued like hell for libel. Why you did not make your comments using your original ID? Afraid of something?




The numbers will not lie but watch them closely beacause by the time you notice it so will many others!
Ask the questions I have suggested!
I know very little about shares and investing but a lot about running a sucessful dental practice.  
If 1300 are doing what I am suspicious of there will be three stages for each individual practice.
Stage 1.  Practice is bought and Dentists are contracted to work and acheive growth targets.  This is rewarded with payout provisions in their contract.  So they are effectively encouraged to manage their own practice.  The profitability of which comes back to them in the capital payments due under the contract.
Stage 2.  Principal Dentist leaves because he has taken the best of the contract payouts and wants to own his own business again.  Maybe equipment is becoming run down and not replaced. Maybe he sold as part of a retirement plan.  Because contract has restriction of practice clauses the Dentist cannot imediately start again in same area.  So replacement dentists are bought in and may still be profitable to an extent because principal dentist cannot compete.  They practice on "location goodwill" seeing many patients at least once.
Stage 3 Principal Dentist non-compete clause expires or word gets around professional community of a business oppurtunity due to corporate practices in general not being well thought of by profession and opposing practice opens nearby- Profitablity crashes.

In relation to greenfield sites wouldn't you like to know how these individually are going?
The bargain purchase recorded in the annual report?  Has it delivered any net earnings to the company?  When will it? 
 Will next years 1300 profit growth equal the EBIT of the Bray Park acquistion? 

As far as tangible assets what are they Dental equipment and materials? what else?
Just ask the ? Is this all smoke and mirrors? 
At least with ABC childcare the administrators had a lot of property they could sell up!


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## frankbaozhu (31 December 2010)

Molar, here are my answers to your questions. I know it is a bit long, but I think there are not many chances in one's life time to make a great investment at reasonable price, so I decide to spend my time to write those down. Enjoy!

1. How much cash and shares are 1300smiles paying for these practices that they buy?

Molar, you can pretty much conclude how many acquisitions ONT has made over the years and the amount they spent on them. The conclusion is that over the last 7 years, there was not a single share issued for acquisitions, and a total of 281273 share will be issued if the earnings target is met.

Over the last 7 years, ONT spent 12152801 on all the acquisitions. Assuming all those shares will be issued, that is a little over 1.1 million, which is less than 10 percent of the total payment.

Acquisition in 2003

Gentle Dental Group - Lisa Matriste
Consideration 14765, no shares issued

Dr Brian Creedy’s 
Consideration 50000-100000 no shares issued


Acquisition in 2005-2006

Bardon 
Consideration: 263215 no shares issued

Chevron Island 
Consideration: 222243 no shares issued

Mackay
Consideration: 32173 no shares issued and subsequently moved into a new facility

Acquisition in 2006-2007

Carindale 
Consideration: 1702929  7 beds  no shares issued

Other 2 practices
Consideration 329458  estimate 2-3 beds  no shares issued
Goodwill:  845963

Acquisition in 2007-2008

Caloundra 1401032
Rockhampton 401042
Toowoomba 2650268
Bundaberg 5035676

Total consideration is 9488018, and goodwill is 7645018, 281273 shares were issued

On this point, it is not possible to get a hold on specific numbers.

Acquisition in 2008-2009

There was no acquisition.

Acquisition in 2009-2010

Springwood  143000
Tingalpa 250 resulted in a negative good will of 535K!


2. Are these contracts conditional on the dentist working for 3-5 years in the practice? ie the purchase price paid for the practice has capitilsed part of the expense for that dentists wages for the next 3-5 years.

I will try to contact the management for the details. Your concern is totally possible. You were implying that ONT was overpaying dentists intentionally so that they can report better earnings, since goodwill will not be amortized. For one thing, this kind of accounting treatment is a violation of law. You were suggesting ONT was systematically trying to inflate earnings, right? Let me ask again, show me the numbers and facts to support your claim. See? I have mine here.

On the other hand, look at the data in 2009 annual report, note 11. If your claim about capitalizing salaries is true, then the goodwill should be a lot higher in a lot of practices. It is common sense that dentists are good earners. 3 -5 years salaries for a single dentist would mean around 1 million dollars. Hey, there is only 3 practices with goodwill over 1 million. Look at the numbers:

Caloundra:    5 doctors   1049000 in goodwill
Toowoomba   7 doctors   2147000 in goodwill
Bundaberg     7 doctors   4693000 in goodwill

So the doctors hang around 3-5 years because of those upfront payments?



3. Why won't management release the figures for individual practices? Is it true that the individual practice profitability Is falling once the original dentists leave, despite introducing increased chair numbers? Is the growth in total business earnings made up by buying more high end practices whatever the cost so that their earnings can be reported as profit! and the overall company report great revenue growth?

Once again, you are making unfounded statements here. Why it is true  the profitability of individual practice is falling once the original dentists left? Do you have any numbers here?

Let us do the simple math here. since 2003, ONT spent around 13.3 million in acquisition. In 2003, ONT reported NPAT of 680K. Last year ONT reported NPAT of 4.3 million. So for the 13.3 million ONT invested over the years, and mostly in 2007, the return this year is an astounding 3.6 million. Molar, do we miss something here? Can you explain the increase in NPAT?

Molar, you are also saying that ONT has used acquisitions to boost its revenue and earnings specifically. I am not an expert. But could you please point me to the financial irregularities here? Or is this your imagination?

4. Graham Middleton is an accountant at a company called Synstrat he has extensive experience in valuing dental practices and writes in the ADA federal newsletter. If you want investment advice on this company or any other dental company track him down!

I have no interest to give your friend my businesses.

5. If as the MD says in his report 1300 is so great at running dental practices are they attracting Australian trained graduates of any nationality or are they taking applicants who would work anywhere for an Autralian VISA. 

Molar, are you a racist and against immigrants? I know this is a serious accusation, but it seems to me you have major problems with the nationality. In your posts, you implied again and again you discriminated those docs with nationality other than Australians. And based on your writing skills, I suppose you are not a native speaker or were poorly educated. What is your problem then?

For the first time I think you are just a retard.


6. Are 1300 smiles patients happy? Can the company provide any survey data to support this taken from one of the practices after the selling dentist has left and 1300 management has moved in?

............ I really do not get your point. Why do not you run a survey and tell us the results?

7. What percentage of dentists now working for 1300smiles have been there for longer than 12 mths?

I need to contact management to get the answer. 

The number one question is " Is the business being run to be a long term profitable business or is the number one goal to report revenue growth and thus increase the SP."

My data and facts, in my opinion, answered your question.


Molar, I am tired of this unfair battle. You issued your guesses, speculations and imagination trying to blast a company that makes its shareholder happy and contributes to the society. On the other hand, I am trying hard to give our readers facts, numbers and careful analysis. Could you please counter all my arguments with your numbers and facts? 

I am looking forward to hearing your reply.

Fan


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## frankbaozhu (31 December 2010)

prawn_86 said:


> This thread has a heap of good info from both sides. Lets please stick to the facts and (reasoned) opinions without being confrontational or baiting each other.
> 
> 
> 
> ...




Moderator, did you read the previous posts? Did you see his comments toward foreign doctors and immigrants?How many facts were there in this guy's posts? I am sure I cannot prevent someone from expressing their opinions, but sometimes you saw something really awful and you got mad.

I will contain myself then. Molar, please give me your facts and numbers instead of your hypothesis. Or get them tested before you post anything.


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## Billyb (31 December 2010)

> Molar, are you a racist and against immigrants? I know this is a serious accusation, but it seems to me you have major problems with the nationality.




Read his post again without your personal bias. He is not being racist at all. He is saying that a good dental practice will attract Australian graduates. When dental practices are unable to attract Australian graduates, they will have no choice but to take immigrant dentists. He is questioning why these practices haven't been able to attract Australian grads.


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## molar (31 December 2010)

frankbaozhu said:


> Molar, here are my answers to your questions. I know it is a bit long, but I think there are not many chances in one's life time to make a great investment at reasonable price, so I decide to spend my time to write those down. Enjoy!
> 
> 1. How much cash and shares are 1300smiles paying for these practices that they buy?
> 
> ...




You spent your time writing these down because you have an interest in selling this company.  You are so obviously part of the 1300business, which I am suspicious is not about dentistry it is about reporting revenue growth at any cost and thus inflating share price.
If I have misjudged here and you are just an investor well look lets not fall out-I am not a racist and I wish these Immigrants all the best.  They however will never generate the profits of the dentists they are replacing nor will most of them in the short term build practices.
Take the Bundaberg acquistion as you say with a goodwill value of 4.6 million dollars will this goodwill value be there in 2 years if Denis Ingham leaves.  This initial payment would have been I believe conditional on him and other key dentists signing an agreement to continue working for at least 3 years.  In the abcense of this contract his practice could probably have sold on the market for approx 6-800K
Lets look at the earlier acquistions Rockhampton,Gladstone is it true that these practices are a ghost of what they were?
There I go again more unsubstantiated questions? 
I'll tell you what FAN.  If its numbers your looking for you won't get them from me you will have to obtain these through the correct legal channels.  I would imagine all employees and Dentists are bound by confidentiality clauses so they won't be able to help you either.  The best I can do for you is to get you asking the right questions.
But you sound like you know what your about so go and buy more of this once in a life time oppurtunity.  Life is to short to left asking why didn't I


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## robusta (31 December 2010)

molar said:


> The numbers will not lie but watch them closely beacause by the time you notice it so will many others!!




All I can see at the moment is the satisfactory numbers generated by ONT but as with all the companies I own shares in I will continue to watch them like a hawk. 




molar said:


> As far as tangible assets what are they Dental equipment and materials? what else?
> Just ask the ? Is this all smoke and mirrors?
> At least with ABC childcare the administrators had a lot of property they could sell up!




ABC went bankrupt using the strategy you are warning about this showed up in the ballance sheet and cashflow statement long before they were put into recievership.
The ROE was negative and they had to keep on increasing borrowings and issuing new shares to keep the "growth story" alive. 
The biggest sign of trouble was the company cash flow, it went from minus $4m in 1999 to minus $1,372m in 2007.

ONT has a positive cash flow, 2008 $715,000, 2009 $1,807,000, 2010 $4,955,000.

Normally I do not invest in businesses that grow by aquisition as they have a long history of overpaying, when they do it shows up in the cashflow and ROE. With a positive cashflow and ROE of ~33% I believe ONT is a exception until the numbers prove otherwise.


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## frankbaozhu (31 December 2010)

I suppose right now I have made my point clear and my arguments were not countered in anyway. 

Molar, I am actually thankful of you. If it were not for you, I would not have pull those things together to get a better picture of the business. Good luck with your investment. I wish you well.


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## robusta (31 December 2010)

skc said:


> When a company relies on the service of highly educated professionals who are usually pretty smart and have more loyalty to their profession than their employer/company, the risk of them leaving is always significant.
> 
> There is no doubt some company does it better/worse than others.
> 
> ...




Could not agree more except for VGH being similar to ONT.

VGH just had a massive $66m goodwill impairment charge and also have a Debt/Equity ratio of 154%, cash flow is also ordinary, they have definately been paying too much for aquistions. They will probably have to raise capital in the near future.


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## molar (31 December 2010)

frankbaozhu said:


> I suppose right now I have made my point clear and my arguments were not countered in anyway.
> 
> Molar, I am actually thankful of you. If it were not for you, I would not have pull those things together to get a better picture of the business. Good luck with your investment. I wish you well.




Interesting release on the ASX just now did you do this just for me?


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## robusta (31 December 2010)

molar said:


> Interesting release on the ASX just now did you do this just for me?




Wow let's move this over to the conspiracy theory thread, most companies are making similar announcements to comply with new laws.

Speaking of conspiracies I find it strange that you and your mate or alter ego Billyb have recently joined ASF in late December and have only made negative comments on ONT. I would like to thank you both for your care for ONT shareholders and your warnings. Surely both of you would not have a axe to grind or be trying to impact the sp through your comments for self gain or revenge? No that could not be true I must be getting paranoid.


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## molar (31 December 2010)

robusta said:


> Wow let's move this over to the conspiracy theory thread, most companies are making similar announcements to comply with new laws.
> 
> Speaking of conspiracies I find it strange that you and your mate or alter ego Billyb have recently joined ASF in late December and have only made negative comments on ONT. I would like to thank you both for your care for ONT shareholders and your warnings. Surely both of you would not have a axe to grind or be trying to impact the sp through your comments for self gain or revenge? No that could not be true I must be getting paranoid.




Obviously I have a motive.  I have not had a good experince with this company.
I told you in my opening post how I got to this forum so what you have discovered is not new.
I am not nor do i know who Billy B is but he seems to be descibing the practice with which I am acquainted.  I admit it is very co-incidental that he is new to the forum at the same time as me?
However my motives are immaterial.  I am not giving any inside information but,.... you my friend have been thrown a bone.  I will condense it to one question.  What is the individual revenue of each 1300 practice.  It is hard to fudge revenue.  Look at the revenue of the practices that have been acquired longer than 4 years. Find the answer to this question and you have solved the riddle that is 1300smiles.  
I would not believe the allegations of one malcontent were I in your position either!


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## ROE (4 January 2011)

Interesting post last couples of days 
I have no intention of selling ONT
I seen this many times before
Sometimes ago some dude pop up in CCP claiming it doesn't have license to collect and a lot of other stuff...I ignore...CCP keep double up in price and double up in profit 

Sometimes again ago many of people tell me to sell FLT stocks because they know someone who works in FLT and they not making money in those stores..

I again ignore the bull**** and stick with what i know .. FLT up 300% since

now ONT game on again..again I ignore


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## Billyb (5 January 2011)

robusta said:


> Wow let's move this over to the conspiracy theory thread, most companies are making similar announcements to comply with new laws.
> 
> Speaking of conspiracies I find it strange that you and your mate or alter ego Billyb have recently joined ASF in late December and have only made negative comments on ONT. I would like to thank you both for your care for ONT shareholders and your warnings. Surely both of you would not have a axe to grind or be trying to impact the sp through your comments for self gain or revenge? No that could not be true I must be getting paranoid.




I have no shares in ONT, so I don't really care too much about what happens to the share price. I don't know much about share investment, but common sense tells me that what I say on a small online forum will have no impact on the share price...so perhaps you may wish to reconsider who is being paranoid. My reason for joining the forum is actually to learn more about share investment in general (I am new to it), but since I am in the dental industry and know a fair bit about how this company works, I felt like contributing my 2 cents.



> No that could not be true I must be getting paranoid.




Yes, you are being paranoid buddy. The hostilities in some sections of this forum are appalling.


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## skc (5 January 2011)

Billyb said:


> I have no shares in ONT, so I don't really care too much about what happens to the share price. I don't know much about share investment, but common sense tells me that what I say on a small online forum will have no impact on the share price...so perhaps you may wish to reconsider who is being paranoid. My reason for joining the forum is actually to learn more about share investment in general (I am new to it), but since I am in the dental industry and know a fair bit about how this company works, I felt like contributing my 2 cents.
> Yes, you are being paranoid buddy. The hostilities in some sections of this forum are appalling.




Thanks for dropping in. It's always good to have some industry insights rather than just have traders pouring over the financials. And unfortunately sometimes some holders get a bit offended when you criticise their investments... only human nature I suppose.

The market is a funny place and many things can happen. Enron was 'the most admired company' for many years in a row before the collapse - but there were plenty of time to get out if you keep a finger on the pulse.

There is actually a very simple solution if an investor thinks some of these doubts are valid... just have a stop loss in place for if things start to look ugly. E.g. ROC/ROE fallen below certain level, announcement of falling revenue/profit etc.

But until then, most of what is said here is just speculation.


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## robusta (5 January 2011)

Billyb said:


> I have no shares in ONT, so I don't really care too much about what happens to the share price. I don't know much about share investment, but common sense tells me that what I say on a small online forum will have no impact on the share price...so perhaps you may wish to reconsider who is being paranoid. My reason for joining the forum is actually to learn more about share investment in general (I am new to it), but since I am in the dental industry and know a fair bit about how this company works, I felt like contributing my 2 cents.
> 
> 
> 
> Yes, you are being paranoid buddy. The hostilities in some sections of this forum are appalling.




I am sorry if I caused any offence.

I should have merely pointed out the coincidence of a quiet thread that only had seven post's on it in the six months it has been opened all of a sudden had two new members posting on it exculsively generating twentyfour post's in ten days.

You and Molar may be right and if you are I thank you, but I invest for the long term in companies with good fundamentals and do not trade on rumours.


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## frankbaozhu (13 January 2011)

robusta said:


> I am sorry if I caused any offence.
> 
> I should have merely pointed out the coincidence of a quiet thread that only had seven post's on it in the six months it has been opened all of a sudden had two new members posting on it exculsively generating twentyfour post's in ten days.
> 
> You and Molar may be right and if you are I thank you, but I invest for the long term in companies with good fundamentals and do not trade on rumours.




Robusta, I dunno why you were apologizing. Those people and us are looking at things from different angles(or just from different universe). They like to use imprecise languages, emotions and personal experience to draw conclusions; while we, pathetically and hopelessly, trying to find the truth using common senses, careful analysis and hard facts.

We should relax and follow ROE's lead. Ignore those people and live a happier life.


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## Billyb (14 January 2011)

robusta said:


> I am sorry if I caused any offence.




That's quite alright, I can't blame you for being suspicious



> but I invest for the long term in companies with good fundamentals and do not trade on rumours.




Your investing principles sound good to me.

What I posted was merely what I observe in the daily functioning of the company, clearly it may not be the absolute truth nor should it be taken as such, but I think a wise person would question the truth of it rather than immediately disregarding it as trash. The egoic, or emotional type would react to such information but a level head would read it with a neutral attitude first before dismissing it as rubbish. I cannot speak on behalf of molar's comments.



skc said:


> Thanks for dropping in. It's always good to have some industry insights rather than just have traders pouring over the financials. And unfortunately sometimes some holders get a bit offended when you criticise their investments... only human nature I suppose..




Your explanation of human nature is absolutely spot on, and although it is obvious, I didn't realise that as the reason for some of the harsh comments on here, so thanks for pointing that out.


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## jackdau (22 January 2011)

iifunds.com.au
They took a position at under $3. They are a value investing fund.



> *Long-term investment in 1300 Smiles*
> In March 2005, a small Townsville dentistry business listed on the ASX. In the ﬁnancial year before listing, the business had made a $1m proﬁt from 13 dentists in 7 dental practices, six of which were in and around Townsville and one in Cairns.
> Today 1300 Smiles (ASX code ONT) has 20 practices, mostly down the eastern side of Queensland, and will generate a proﬁt for the year ended 30 June 2010 in excess of $4m, four times what it generated 6 years ago. The growth has been achieved with minimal use of debt, a negligible increase in the number of shares on issue and a
> healthy dividend payout ratio.
> ...




I think that this is the same as any company. You watch what comes out of the MD's mouth. You sweat over the numbers and if the two don't correlate then head for the exit.

I agree that the last few times Mr Holmes has put pen to paper it did sound a bit grandiose. 
However when I have emailed him he was very quick to reply and answered my questions - though with not as much detail as I would like. 

Whoever looked up on google maps the HQ - awesome dude! I was cracking up. That reminded me of Peter Lynch's 'One Up On Wall Street'. He loved it when the HQ was out of the way, disheveled and obviously in need of new carpet. 

I work in a 7 doctor general practice so I have a inside view on running a medical practice. Dental practices have higher overheads (more staff) but they also have greater revenue per hour than most GPs. 

Declaration of Interest: ONT is now my biggest holding due to the recent surge in the share price.

BTW I am new here. Is there a value investing forum here on aussiestockforums? If not I would love to here of some other good companies with high ROE/ROC, and little debt. If they can also retain a lot of their earnings as well that would be great. Oh yeah -final point- let me know if you think their current price has a large margin of safety as well.


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## robusta (21 February 2011)

Interesting half yearly report out today compared to pcp:
Revunue up 25% to $14.569m
NPAT up  19% to $2.687m
EPS up 14% to 12.6c
Interim dividend up 15% to 7.5c

On the face of it it makes me regret taking some profits a couple of months ago @ $4.15because the sp was at a substantual premium to my calculation of IV.

Now the interesting part, ONT have granted a licence to a marketing and managemant company, allowing it to market, manage and operate four southeast QLD practices.

I allways thought ONT was in the business of managing dental practices so why sell that right?

Note 9 Individually Significant Items
"....statement of comprehensive income includes liscence fee of $183,000...statement of financial position includes a licence fee recievable of $900,000"

This makes me wonder are ONT giving up future profits to this marketing and management company?


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## So_Cynical (21 February 2011)

robusta said:


> I allways thought ONT was in the business of managing dental practices so why sell that right?
> 
> Note 9 Individually Significant Items
> "....statement of comprehensive income includes liscence fee of $183,000...statement of financial position includes a licence fee recievable of $900,000"
> ...




Looks to me like there taking a 900K fee i lieu of actually having to operate 4 practices...a sort of quasi franchise?


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## thinker1 (22 February 2011)

So_Cynical said:


> Looks to me like there taking a 900K fee i lieu of actually having to operate 4 practices...a sort of quasi franchise?



Looks suspicious to me!  Isn't 1300smiles a marketing and management company?
So now we have a dentist employing a marketing and management company who in turn licenses another marketing and management company to run the company in return for 900K.  How many people can get a bite of this Cherry?
How come no details of who this marketing and management company is?  My eddy groves alarm bells are ringing!!  Is this an assetless willing friend/family member who can come to the rescue with 900k of supposed income to turn a profit slump into a profit rise and "keep the fantasy alive"  What would the profit look like without this 833K?
I have heard rumours of four grossly underperforming practices in Brisbane.  Carendale being one of them. I wonder if this is one of the four that some luckless company has trumped up 900k to have a cut in?
A good dividend? Everytime the MD pays a dividend 70+%  goes to him.  He can effectively strip the company of its cash this way.
Robusta I don't think you watch the figures like a "Hawk" at all.  You are blinded by the first page revenue up profit up!
Wake up to what is going on here if you closed out at 4.15 or even 3.90 you WON bigtime.  With such a small register of shareholders when this thing goes down it will go down fast and hard and stop losses won't help anyone!


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## robusta (22 February 2011)

thinker1 said:


> Looks suspicious to me!  Isn't 1300smiles a marketing and management company?
> So now we have a dentist employing a marketing and management company who in turn licenses another marketing and management company to run the company in return for 900K.  How many people can get a bite of this Cherry?






So_Cynical said:


> Looks to me like there taking a 900K fee i lieu of actually having to operate 4 practices...a sort of quasi franchise?




I think you may be right So_Cynical this does look like a new direction. If it works and can bring in more practices not owned by ONT it should be good for profits.



thinker1 said:


> How come no details of who this marketing and management company is?  My eddy groves alarm bells are ringing!!




This if laughable to compare ONT with ABC learning, you have got to be joking.



thinker1 said:


> Is this an assetless willing friend/family member who can come to the rescue with 900k of supposed income to turn a profit slump into a profit rise and "keep the fantasy alive"




Good plan, pump 900k into a business, pay tax on it, retain some in the business, pay out the ballance as dividend 70% to yourself (pay tax again) and 30% to other owners to keep the profit growth looking good - genius



thinker1 said:


> What would the profit look like without this 833K?




Correct me if I am wrong;
$183,000 on statement of comprehensive income, this would show up in NPAT?
$833,000 on statement of financial position, this would be in current assets and maybe translate to income in the future?

I an not a accountant so would love some clarification of the above points.



thinker1 said:


> I have heard rumours of four grossly underperforming practices in Brisbane.  Carendale being one of them. I wonder if this is one of the four that some luckless company has trumped up 900k to have a cut in?




And this luckless company would have not done due dilligence?



thinker1 said:


> A good dividend? Everytime the MD pays a dividend 70+%  goes to him.  He can effectively strip the company of its cash this way.




Hmmm, for the last six years equity per share increasing, earnings per share increasing, dividend increasing, conservative gearing and good ROE.




thinker1 said:


> Robusta I don't think you watch the figures like a "Hawk" at all.  You are blinded by the first page revenue up profit up!
> Wake up to what is going on here if you closed out at 4.15 or even 3.90 you WON bigtime.  With such a small register of shareholders when this thing goes down it will go down fast and hard and stop losses won't help anyone




I dont have stop losses if the sp drops in the few companies I invest in I think more about buying than selling.

Still not sure about ONT outsourcing management but I am not loosing any sleep about it at the moment.


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## thinker1 (22 February 2011)

robusta said:


> I think you may be right So_Cynical this does look like a new direction. If it works and can bring in more practices not owned by ONT it should be good for profits.
> 
> 
> 
> ...





I think you are right that it is only 183000 in NPAT this time.  But this deal still smells to me bigtime. 
How can any dental practice sustain two levels of marketing and management firms taking a cut?  I am lead to believe tingalpa, carendale, and springwood are basket cases in Brisbane.  He can't get any profit out of them so he has trumped up some way of getting it thru a license to some other company????  I would be very interested to know where this 900k is coming from.  My guess is 900k out on the balance sheet capital payout and 900k in on the revenue.  Why is that 833k listed as a liability in staement of overall financial position. (isn't it?)
 What is laughable about comparing to ABC?  It is just a much smaller version?  
I am thinking at least if he joins eddy in maybe few years time he will be used to living in small confined space having done time on ywam ship.  The bars might be something new tho.
If you sold out at 4.15 laugh long and hard because you fell on your feet.

Stop loss won't work on this because look at the turnover in shares.  For a stop loss to work you need a pool of buyers


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## robusta (22 February 2011)

thinker1 said:


> I think you are right that it is only 183000 in NPAT this time.  But this deal still smells to me bigtime.
> How can any dental practice sustain two levels of marketing and management firms taking a cut?




ONT is more than a marketing and management firm it can be also looked at as a investment and buying group within the dental industry and maybe in the future a franchisor?
Is it uncommon for a franchisee marketing and managment company to operate numerous businesses within one group and everyone to make money?




thinker1 said:


> I am lead to believe tingalpa, carendale, and springwood are basket cases in Brisbane.  He can't get any profit out of them so he has trumped up some way of getting it thru a license to some other company????  I would be very interested to know where this 900k is coming from.  My guess is 900k out on the balance sheet capital payout and 900k in on the revenue.  Why is that 833k listed as a liability in staement of overall financial position. (isn't it?)




Intersting accounting acrobatics, not sure why ONT would do this to boost future earnings when it would have to be reversed in future earnings?



thinker1 said:


> What is laughable about comparing to ABC?  It is just a much smaller version?
> I am thinking at least if he joins eddy in maybe few years time he will be used to living in small confined space having done time on ywam ship.  The bars might be something new tho.




ABC learning had high debt/equity, multiple capital raisings, and a rapidly declining ROE   (5% at the end) and negative cash flow in its last 9 years except 2001.

I see no comparison with ONT.



thinker1 said:


> If you sold out at 4.15 laugh long and hard because you fell on your feet.




I did not sell my holding I just took some profit @$4.15, ONT is now 4.3% of my total portfolio.



thinker1 said:


> Stop loss won't work on this because look at the turnover in shares.  For a stop loss to work you need a pool of buyers




Liquidity is a consideration for me when deciding how much capital to allocate but I do not have a stop loss on any of my holdings.


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## robusta (22 February 2011)

Despite my overall positive view of ONT I am not entirely happy with the debt/equity ratio (~50.44%) and the high amount of goodwill on the books. 

The ROE is satisfactory @ ~36% but I will monitor closely and sell if the sp moves too far past my calculation of IV or the returns start to deteriorate in the next reporting season.


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## thinker1 (24 February 2011)

All I would need to allay my suspicions is a name for this company, so I could check it out and see who they are.  I just cannot believe that this is an arms length transaction.  What marketing company in there right mind would pay a license fee of 900k in order to manage and market 4 dental practices.  Check out dental jobsearch or ada website for practices for sale you could buy four practices in Brisbane for this amount.  
McDonalds sells franchises to business owners who run there own business.  

1300 is a management company which sells franchises to management companies who manage dental practices for dentists who run there own business within these practices????
This enables 1300 management staff to concentrate on breathing while the management franchisees concentrate on managing and marketing for the dentists who concentrate on doing what they do best which is dentistry.  

I don't think Mr Buffet would buy it.  If the business model sucks why wait around for the figures to ditch.  It may, as someone has said earlier on this thread go on for a while yet but it just has to end in tears! Good Luck hope you pick it in time


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## thinker1 (24 February 2011)

I wonder are these four practices still marketed under the 1300 brand?


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## Billyb (24 February 2011)

> What marketing company in there right mind would pay a license fee of 900k in order to manage and market 4 dental practices.  Check out dental jobsearch or ada website for practices for sale you could buy four practices in Brisbane for this amount.




Just to clarify, this is not true. 1300 Smiles practices are typically multiple chair facilities, so they would cost a lot more than the prices you see advertised for most private practices, which are single chair only. Not to mention cost of goodwill.



> All I would need to allay my suspicions is a name for this company, so I could check it out and see who they are.




I agree, the lack of information on this is a bit strange.



> I don't think Mr Buffet would buy it.  If the business model sucks why wait around for the figures to ditch.  It may, as someone has said earlier on this thread go on for a while yet but it just has to end in tears! Good Luck hope you pick it in time




Dentistry is a very lucrative business, there is no doubt about that. But 1300 runs their business differently to most private practices. Private practices thrive because patients want to continue seeing the same principle dentist that they have been seeing their whole life. 1300 typically buys practices where the principle dentist is close to leaving/retiring. Once the principle dentist leaves, who knows what will happen to that patient base, but chances are it will drop. 

1300 wont go down the gurgler anytime soon. My view is a long term view, it may take 5-10 years to pan out. Just need to keep an eye on it


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## thinker1 (24 February 2011)

thinker1 said:


> I don't think Mr Buffet would buy it.  If the business model sucks why wait around for the figures to ditch.  It may, as someone has said earlier on this thread go on for a while yet but it just has to end in tears! Good Luck hope you pick it in time






Billyb said:


> Dentistry is a very lucrative business, there is no doubt about that. But 1300 runs their business differently to most private practices. Private practices thrive because patients want to continue seeing the same principle dentist that they have been seeing their whole life. 1300 typically buys practices where the principle dentist is close to leaving/retiring. Once the principle dentist leaves, who knows what will happen to that patient base, but chances are it will drop.
> 
> 1300 wont go down the gurgler anytime soon. My view is a long term view, it may take 5-10 years to pan out. Just need to keep an eye on it.




Actually i believe the only practice in Brisbane with a client base to support more than one dentist is Bray Park. (maybe also Carseldine I don't much about it) They may be multi-dentist facilities but they are single dentist or less practices.  The facilities are leased however.  
I agree though that with a cashflow like they have they are not about to go down the gurgler any time soon, (not while the EPC scheme is still going) but the supposed growth is a fallacy.  Also the goodwill on the books is grossly overvalued.

I like how the MD makes a big deal over Medicare, teen vouchers, and government emergency treatment-this tells me they are struggling to get bums in their seats.  Most of the dentists they bought out would not have touched this work because of its lower margins.  This work is still profitable but not as profitable as higher end dentistry on which the price they paid for these practices is based.  I heard they recruit patients from nursing homes on the EPC which can be profitable if the Dentist is prepared to be creative??  But about as secure long term for the dentist as capitilising your expenses is for a company.  It will catch-up!


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## Joe Blow (24 February 2011)

I would urge those who do not understand how to use the quote tags to please review this thread: https://www.aussiestockforums.com/forums/showthread.php?t=2737

When the tags are messed up it is often hard to determine who is saying what and following the thread becomes very difficult.

Also, don't be afraid to use your 20 minute window of opportunity to edit your post and correct any errors.


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## robusta (10 March 2011)

Sold the last of my ONT this week @$4.00, took a few days to fill the order. Found another opportunity and ONT was the most expensive in my portfolio compared to IV.

Good luck to all who hold.


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## thinker1 (29 April 2011)

robusta said:


> Sold the last of my ONT this week @$4.00, took a few days to fill the order. Found another opportunity and ONT was the most expensive in my portfolio compared to IV.
> 
> Good luck to all who hold.



They're going to need it! $3.65 and falling


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## thinker1 (6 March 2012)

Somethings to notice from the financial reports of this company.
2011 end of year figures- fees from employed dentists exceed fees from from dentists using the facility and paying license fee's= Dentist who have been paid inflated goodwill leaving and being replaced by employed dentists.
Maintainence of revenue is purely due to Medicare funded Chronic Dental Disease Scheme which 1300 Bulk Bills.
I am told that total revenue fromm CDDS is 60-80% of 1300 total revenue!
CDDS is scheduled to end 31st of March.
So if your a shareholder you better be asking the following questions of management.
Is the 60-80% of revenue from CDDS true?
If so have Corporate Governence provisions been breached in that the Market has not been warned of the downside risk to profit that the closure of this scheme will bring to 1300smiles.
The above is heresay but if I held shares I would be asking these questions sooner rather than later.  If management have a different story it would be interesting to hear what it is.


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## McLovin (6 March 2012)

thinker1 said:
			
		

> CDDS is scheduled to end 31st of March.






> The Medicare Chronic Disease Dental Scheme continues to operate and there is no closure date set at this stage. The Government attempted to close the Scheme in 2008 but the necessary legislative instrument was disallowed by the Senate. The closure was to make funding available for the introduction of a new Commonwealth Dental Health Program. The Government has stated its intention to close the Scheme, but at this stage the Scheme remains open.




http://www.health.gov.au/internet/main/publishing.nsf/content/dental+care+services

Interesting about them being so dependent on one Medicare. Is that disclosed by the company?


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## thinker1 (7 March 2012)

McLovin said:


> http://www.health.gov.au/internet/main/publishing.nsf/content/dental+care+services
> 
> Interesting about them being so dependent on one Medicare. Is that disclosed by the company?




"Chronic Disease Dental Scheme Update

Tuesday, 21 February 2012
The ADA continues to receive calls from members and their practice staff regarding the closure of the Chronic Disease Dental Scheme.


Notwithstanding the comments from the Hon. Tanya Plibersek, Minister for Health recently that it is still the Government’s intention to close the scheme, there is currently no legislation in front of Parliament for this to happen.

It is the ADA’s understanding that the references to 31 March 2012 as a potential closure date refers only to the date for which future funding has been identified within budget estimates.  

The process for closing such a scheme is the introduction of a legislative determination to repeal the existing legislation into Parliament.  This legislation needs to pass through both the House of Representatives and the Senate.  It must be presented into the House for 15 sitting days before it can be passed.  The ADA is monitoring all legislative amendments being introduced by the Federal Government and will keep members up to date if there is any change or if further information becomes available. "

You are correct this is only a stated finish date it has not cleared parliment yet.  However the budget for thisprogram has blown out from 250million intended to 1.5billion over the 4 years it has been in place.
Whatever it is replaced with is not going to have anywhere near the funding that this scheme has managed to get purely because of a political stand-off between coalition and labor MP's
If you own shares in this company also look into the Medicare audits they are making dentists refund large sums of money beacuse of administartive errors in the sequence in which trt was performed.
This company has to be exposed in the event of an audit I would think?


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## McLovin (7 March 2012)

thinker1, what was your source for the claim that they are receiving 60-80% of their revenue from that scheme? It's a pretty big mutzah ball if it's correct.


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## thinker1 (7 March 2012)

McLe aovin said:


> thinker1, what was your source for the claim that they are receiving 60-80% of their revenue from that scheme? It's a pretty big mutzah ball if it's correct.




The source is heresay it may not be true but I believe it is. The company has a website contact details. Call/email, ask them what it is.


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## thinker1 (7 March 2012)

The 60-80% is a suggestion of what it may have got to in the last few months.
As more of the bought out dentists leave more of the revenue has to come from the "I will see anyone if it's free" clients who see the newly employed dentists.
So it might not be this high when the whole of the last year is looked at.
Again it may not be this high at all if some can get something concrete out of the company I would like to hear it.  It just seems odd that the md report reads like a sales pitch for the shares with no mention of the pending closure of this scheme!


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## thinker1 (18 May 2012)

Market release talks up federal budget but doesn't mention that the Government restated their intention to close the CDDS which has been blowing budget by well over the announced budget spend every year.  The federal budget announcement is a trade-off to the greens to get support to close the CDDS in the Senate.
Why do the market releases always seem to be aimed at promoting the shares rather than open and honest disclosure?
The thing is even smart people are buying their line and the share price is going up so maybe I am wrong.
I will be interested to see what sought of consultancy/license fee income they are going to conjure up this reporting season to keep profits going up.
I still standby my opinion that the way the individual practices I am aware of are being run and the profits that are reported are both unsustainable.


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## smsmlmd (23 July 2012)

Hello everyone, I have read most of your comments and I thought I would share my view on the dental industry in general, not on ONT specifically. To be clear, I am not affiliated whatsoever with ONT and I dont hold any shares in it; however, Dental Management & Marketing is my bread and butter.

Looking at any dental group, you need to have a long term view, so my advise: Dont bother reading the quarterly reports and just read it once every 18 months to 2 years. About conspiracy theories (lots of them were mentioned), if someone owns 70% of the company, he/she will do its best to make ONT worth much more 20 years from now. They are definitely not short term thinkers, especially dentists... Thats just how they are....

However, to get re-assured, you need to request ONT to report some key statistics, along with the usual financial parameters. These statistics are the REAL KEY to assess dental practices and groups.

1. *Capacity report,* how much capacity does ONT has across its centers? (Total chair hours per month)
2. *Utilisation report*, how much of this capacity is utilised? (A simple percentage)
3. *Break down of revenue of each dentist per treatement category,* What percentage of revenue came from hygiene work (scaling & polishing), restorative (fillings), prosthetic work (crown & Bridge work / cosmetic), surgical and so on.
4. H*ow many specialist referals are being sent out per month for each center*? You could have a combined report for centers which are within an adequate raduis from each other... This shows the future growth potential of specialist centers, as the real juice and the future is in speciality centers.

This is how you judge dental practices. You can forget about old dentists leaving and new ones joining (Aussie or not), as dentists have curves too, they will need between 1 to 2 years to establish themselves and reach a certain technically positive production (meaning, they do more of the expensive work, and they are able to sell services better). 

You dont need to worry a lot about which type of funding currently exists and if it will stay for long... A correction might happen in revenues due to changes of funding schemes, but dentistry will remain a human need over the long term and it will never stop.

A mention of cheap equipment and materials was in this thread, you need to know that a dentist will never utilise materials that they dont know it will do the job. Cheaper is not always worse, many international dental brands are excessively over priced without due justification. If I were you, I wouldnt worry about this point, let the dentists handle it.

Quality should be the only focus along with superior customer service; if you have that, you got a cash cow for the next decades. Patient feedback surverys should be collected & reported on a monthly basis, along with statistics about random phone call surveys (probably 2% to 3% of all patients should be called by a third party or the head office to get feedback).

To summarise, you dont need to worry about old & established dentists leaving after their contracts, you cant control and you cant stop it. Simply focus on bringing well trained dentists, have the custmer service orientation in place and keep an eye on your utilisation report and miz of services offered.

Overall, I believe ONT is here to stay & grow.


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## thinker1 (1 December 2012)

McLovin said:


> http://www.health.gov.au/internet/main/publishing.nsf/content/dental+care+services
> 
> Interesting about them being so dependent on one Medicare. Is that disclosed by the company?




Medicare program ended 30th of November (two days ago)
MD of 1300 Smiles gave a speech recently at an ADIA breakfast during which he described the dental industry(his words, we always liked to think it was a profession) as like the bus in the movie Speed with him being the bus driver (such delusions of grandeur).  The bomb about to explode was the closure of the Medicare scheme.  

This is pretty true only the Bus he is driving is 1300smiles not the dental profession.  The bomb has already exploded but it devasting effects will not be seen until 1st half 2013 reporting.  Last half 2012 will be a bumper because the past three months everyone has been desparately trying to get their work finished while these plans were still in effect.
The business model was bulk bill medicare and have dentists sitting on their hands with appointments available.  I believe the estimate that 40% of 1300's revenue was coming from this scheme is likely true. That is *revenue* not profit!

Can these Dentists attract patients who have to pay out of their own pockets?  Sometime around August 2013 all will be revealed!!
According to the recent speech the MD is pinning his hopes for maintaining the company revenue on a Dental membership plan.  Think gym membership?


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## thinker1 (17 August 2013)

thinker1 said:


> Medicare program ended 30th of November (two days ago)
> MD of 1300 Smiles gave a speech recently at an ADIA breakfast during which he described the dental industry(his words, we always liked to think it was a profession) as like the bus in the movie Speed with him being the bus driver (such delusions of grandeur).  The bomb about to explode was the closure of the Medicare scheme.
> 
> This is pretty true only the Bus he is driving is 1300smiles not the dental profession.  The bomb has already exploded but it devasting effects will not be seen until 1st half 2013 reporting.  Last half 2012 will be a bumper because the past three months everyone has been desparately trying to get their work finished while these plans were still in effect.
> ...




half year ending Dec 2012 NPAT 4 million
half year ending June 2013 NPAT 2.4 million

40% drop in NPAT post CDDS
Despite acquiring 1/3 stake in DMA and a 6 chair Adelaide practice


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## galumay (28 June 2018)

Had a look at this today, I was looking at PSQ and thinking about competitors in the industry, and while they are not competitors, seeing ONT mentioned, I thought I would crunch its numbers through my hand cranked value calculator and see what it spat out. 

Its interesting reading back thru the commentary from a few years ago, the negative analysts seem to have got it wrong as the company appears to be bubbling along nicely. I notice the CEO still has a grating mannerism in his messages to shareholders, its a bit much of a sales pitch and set my radar off a bit!

Generally it was once again a business that met most of my criteria for investibility - just too damn expensive! Well past my range of calculated IV. 

Thats a few rocks turned over today for no reward, the search continues!


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## divs4ever (12 November 2021)

Results of Scheme Meetings and Special Dividend
1300 Smiles Limited (ASX: ONT) (1300 Smiles) is pleased to announce that 1300 Smiles shareholders have
today approved the scheme of arrangement under which Adams Aus BidCo Pty Limited will acquire
approximately 84% of the shares in 1300 Smiles, by way of a scheme of arrangement (Scheme).
Results Scheme Meetings
The resolutions to approve the Scheme, as set out in the Notices of Meeting attached to the Scheme Booklet
dated 12 October 2021, were approved by the requisite majorities of 1300 Smiles shareholders at the General
Scheme Meeting (for all 1300 Smiles shareholders other than the Founder Shareholders) and the Founder
Scheme Meeting.
The voting results of both Scheme Meetings are attached to this announcement.
Special Dividend
The 1300 Smiles directors have today determined to pay a fully franked special dividend of $1.00 for each 1300
Smiles share held by a 1300 Smiles shareholder as at the record date for the special dividend, being 7.00pm
(Sydney time) on Friday, 19 November 2021, subject to the Scheme becoming legally effective. Payment of the
special dividend is currently expected to occur on Friday, 26 November 2021.
Next steps
1300 Smiles will now apply to the Federal Court of Australia (Court) for orders approving the Scheme at the
hearing scheduled for Wednesday, 17 November 2021.
If the Court approves the Scheme, 1300 Smiles intends to lodge a copy of the order of the Court with the
Australian Securities and Investments Commission on Thursday, 18 November 2021. Once this occurs, the
Scheme will become legally effective and 1300 Smiles shares will be suspended from trading on the ASX with
effect from the close of trading on Thursday, 18 November 2021.
The key dates for implementation of the Scheme and payment of the special dividend are set out below*:
Event Date
Second Court Date Wednesday, 17 November 2021
Effective Date
The date on which Court orders will be lodged with ASIC (at which
point the Scheme becomes Effective) and announced to ASX
Last day of trading in 1300 Smiles shares – 1300 Smiles shares will be
suspended from close of trading
Thursday, 18 November 2021
Special Dividend Record Date Friday, 19 November 2021
Scheme Record Date
All 1300 Smiles shareholders on the Scheme Record Date will be
entitled to receive the Scheme Consideration
Wednesday, 24 November 2021
Special Dividend Payment Date Friday, 26 November 2021
Implementation Date
Provision of Scheme consideration
Wednesday, 1 December 2021
All dates are indicative only and, among other things, are subject to approvals from the Court and other scheme conditions
having been satisfied or waived. ONT reserves the right to vary the dates set out above. Any changes to the above
timetable will be announced on ASX.
ATO Class Ruling
1300 Smiles has applied for an ATO Class Ruling to confirm the key taxation implications of the Scheme, the
availability of franking credits attaching to the Special Dividend and whether the Special Dividend forms part of
the capital proceeds under the Scheme. The ATO has not issued the Class Ruling as at the date of this Scheme
Meeting. 1300 Smiles will make an announcement if the Class Ruling is published either on ASX or, if 1300
Smiles is no longer listed at that time, on its website.
This announcement is authorised for release to ASX by the Board.

DYOR

i hold ONT

am currently up 26% on this because i carefully averaged down in the dips

another ' kicked out onto the sidewalk with a handful of cash '


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## System (3 December 2021)

On December 2nd, 2021, 1300 Smiles Limited (ONT) was removed from the ASX's Official List in accordance with Listing Rule 17.11, following implementation of the scheme of arrangement between ONT and its shareholders in connection with the acquisition of approximately 84% of the issued capital in ONT by Adams Aus BidCo Pty Limited.


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