TSX:DNTL - Post Discussion
Post by
retiredcf on Mar 28, 2022 8:33am
RBC 2
Their upside scenario target is $23.00. GLTA
dentalcorp Holdings Ltd.
Q4/21: Results marginally ahead of estimates; Reiterate Outperform rating
Our view: Q4/21 revenues and adj. EBITDA came marginally above RBCe and consensus estimates. The company reported strong same practice sales growth of ~4.9% y/y in Q4. dentalcorp acquired 13 practices in Q4 at ~8.2x GAAP EBITDA (vs. ~7.8x in Q3). The increase in the multiple was due to larger sized acquisitions in Q4 vs. Q3. DNTL has a robust pipeline of 685+ opportunities, of which ~150 are in the advanced stages. We reiterate our Outperform rating and $20 PT as we expect upside potential from dentalcorp's current valuation underpinned by strong EBITDA growth through acquisitions.
Key points:
Q4/21 revenues and EBITDA were marginally ahead of forecasts.
dentalcorp reported Q4/21 revenues of $272.5MM (+8.9% q/q; +20.6% y/y) above RBCe ($270.9MM) and consensus ($271.1MM). Q4/21 GMs at 45.7% declined q/q (49.4% in Q3) and were below RBCe (49.3%) and consensus (49.1%). GMs were impacted due to the normalization of the cost of consumable inventories from previously inflated rates as a result of COVID-19 ($8.7MM). Q4/21 adj. EBITDA of $50.1MM was ahead of both RBCe ($48.7MM) and consensus ($49.6MM). Adj. EBITDA included the one-time COVID-19 expenses of $8.7MM ($0.5MM in Q3). Management anticipates modestly higher results q/q in Q1/22 despite the Omicron- related headwinds in the first 6 weeks of 2022.
13 dental practices acquired at ~8.2x GAAP EBITDA. dentalcorp acquired 13 dental practices in Q4/21 for total consideration of $79.0MM at an implied ~7.6x EBITDA (IFRS) multiple (~8.2x GAAP EBITDA). The company expects the acquired practices to generate ~$10.4MM in annualized adj. EBITDA (IFRS). dentalcorp owned 458 practices in Canada as of end Q4/21.
Robust pipeline and ample liquidity for future acquisitions. The acquisition pipeline remains robust with total opportunities of ~685 ( vs. ~675 in Q3), of which ~150 (vs. ~140 in Q3) are in advanced stages of negotiation. dentalcorp ended Q4/21 with liquidity of ~$542MM (~ $142MM in cash and ~$400MM in debt capacity). Additionally, DNTL completed a bought deal offering for gross proceeds of ~$115.0MM in Jan-22. Management noted that the proceeds from the bought deal are being used to support the acquisition of several accretive larger platforms, all of which are expected to close in H1/22. Net debt to LTM pro-forma adj. GAAP EBITDA was at 4.2x as of Q4/21 (3.6x, including the bought deal).
Estimate revisions. We have revised our estimates marginally higher (see RHS). We expect $45MM of acquired GAAP EBITDA per year in CY22 and CY23. Following the completion of the ~$115MM bought deal, we expect the larger acquisitions to be completed in Q1/22 (~10.5x GAAP EBITDA acquisition multiple). We reiterate our Outperform rating and $20 target based on 17.0x NTM EV/EBITDA on an IFRS basis (18.75x on a US GAAP basis). We believe our multiple is supported by our strong acquisition outlook, and the predictable, non-discretionary nature of dentalcorp's revenues.
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