Australia’s newest dental chain Totally Smiles has launched an initial public offer to raise $35 million ahead of an expected ASX listing next month.

The group has agreed to buy 52 dental practices across the country and put in place profit-sharing schemes with the former owners.

The total cost of the acquisitions is $66 million – which would be funded from the offer proceeds (expected to net out at $27 million) and a $36 million finance facility.

Totally Smiles (the holding company is called Smiles Inclusive) hopes to generate “cost efficiencies through scale, increased purchasing power and improved practice management”.

The group plans to invest in improving patient experience, buy better equipment, adopt a direct marketing strategy and expand with the purchase of more practices.

Between 40 per cent and 60 per cent of profit is planned to be paid in shareholder dividends from 2019.

Offer opens March 21

Totally Smiles lodged a prospectus on Tuesday to sell 35 million shares at $1 apiece.

After the offer, the group will have about 58 million shares on issue, valuing the stock at $58 million.

The venture is led by CEO Mike Timoney who will control a 16.7 per cent stake after the float.

In total, directors and senior managers will control about 21 per cent of the shares – which will be locked under escrow agreements for up to two years.

The group is forecasting $5.8 million profit this year – up from $3.9 million in 2017. Revenue is forecast at $57.6 million, up from $51.9 million.

The offer is due open from March 21 and the shares will trade on the ASX from April 27. The lead manager is Morgans Corporate.

A $10 billion industry

Australians will spend about $10 billion on dental services in 2018, returngin profits of about $2 billion, Totally Smiles says in its prospectus.

Annual industry reveue growth of 2 per cent to 2.5 per cent is partly driven by Australia’s ageing population and an increase in private insdurance cover.

(Totally Smiles says 25-to-44 year olds are the worst age group for dental attendance, while 50to-24 years olds go to the dentist regularly).

Totally Smiles will be up against  range of other dental chains including BUPA’s dental group which owns about 200 practices in Australia and New Zealand.

ASX investors may face some confusion with the two other ASX-listed dental chains which have similar names — Pacific Smiles (ASX:PSQ) and 1300 Smiles (ASX:ONT).

Pacific has about 75 practices while 1300 Smiles has about 24. There are about 7000 dental practice in Australia.

Here are 12-month share price graphs for two other ASX-listed dental chains Pacific Smiles and 1300 Smiles:

Pacific Smiles (ASX:PSQ) shars over the past year. Totally Smiles will compete with Pacific.
Pacific Smiles (ASX:PSQ) shares over the past year. Pacific will be a competitor for Totally Smiles.


1330 Smiles (ASX:ONT) shares over the past year. 1300 Smiles will also compete with Totally Smiles.

Totally Smiles says the local dental space “remains highly fragmented with no enterprise holding over 5 per cent market share”.

However 1300 Smiles is accelerating its acqusition of practices.

“The number of acquisitions we have completed over the past 12 months is significantly higher than in the past few years,” 1300 Smiles boss Daryl Holmes told shareholders last month.

1300 logged $3.9 million profit on $20 million rvenue in the December half.

Pacific reported profit of $2.7 million on revenue of $50.5 million for the same period.