Beware! Highly ambitious forward EBITDA

I really doubt this company will do very well in the long term or even the medium term.


Demand seems to indicate there may be a spike but it is doubtful there will be any traction in the long term.


I’m a dentist and a consultant for the dental industry. I’ve started 15 dental practices myself (more than any other private owner in the country as far as I’m aware) AND currently own quite a few practices. When dentists are looking at buying practices, I analyze the practices for them finding opportunities etc.


Many of the practices Smiles have made offers on have very low to zero ebitda. They are practices that many others have rejected.


This is what I wrote on a forum of dentists:


“Had a thorough read of the prospectus tonight.


Three key points of note.


A 35% increase in forecast ebitda on just the acquired practices, is impossible at worst and freaking miraculous at best. Simply put, very unlikely to happen.


Over $800,000 in total executive remuneration. Almost half is Mike Timoney’s.


It represents 12% of current Ebitda.


Toooo high imho.


Third point - 2 year escrow on Mike’s shares. Very positive for potential shareholders.


I have seen some of the practices these guys are acquiring as clients of mine have been interested in some and I’ve analyzed them.


I have not seen a single practice that I would acquire myself, amongst the ones they have supposedly made offers on.


Some of the practices they have acquired have been overlooked by their listed peers (1300 smiles and PSG) as well as other non-listed corporates.

Further, they seemed to really bombard dentists with advertising as they needed practices ASAP to get the minimum overall size required to make their listing somewhat attractive. I know this came off as quite desperate to many in our profession.


I personally see some massive issues surfacing post sale with many of the practices they have purchased.


However, because their shares are in escrow for 2 years, this should allay some fears. They can’t hit and run.


The executive remuneration  is still a big gravy train for Mike though.


Interesting times. I don’t see the market reacting well if they fall short of their ebitda forecast which is at 35% growth.


If anyone here is selling their practices to them, don’t take shares would be my strong advice.


Anyone working for them, skip the employee share investment plan.”


Also, this is the analysis by Graham Middleton (an accountant), of Synstrat who has extensive experience in the dental industry.


http://createsend.com/t/r-9A267940A6F81DDC2540EF23F30FEDED


Worth a read.


All the above is my opinion only.