ONT - 1300 Smiles

[thinker1]

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!

 

[robusta]

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?

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.

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.

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

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.

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?

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.

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.

 

[thinker1]

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.



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



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



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.



And this luckless company would have not done due dilligence?



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




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.

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

 

[robusta]

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?

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?

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.

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.

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.

 

[robusta]

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.

 

[thinker1]

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

 

[thinker1]

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

 

[Billyb]

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

 

[thinker1]

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.

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!

 

[Joe Blow]

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.

 

[robusta]

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.

 

[thinker1]

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

 

[thinker1]

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.

 

[McLovin]

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?

 

[thinker1]

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?

 

[McLovin]

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.

 

[thinker1]

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.

 

[thinker1]

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!

 

[thinker1]

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.

 

[smsmlmd]

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. How 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.