Pacific Smiles (ASX:PSQ) looks set for a solid FY23 result, but will it eventuate?

Nick Sundich Nick Sundich, July 12, 2023

Pacific Smiles (ASX:PSQ) just issued a trading update to its shareholders where it reaffirmed a positive FY23 result would be forthcoming. But will the result come in this good?





Pacific Smiles (ASX:PSQ) benefiting from demand for dental services

Investors interested in a full in-depth recap of PSQ should check out the article we wrote last month.

Up until today the most recent trading update came in late April. The company guided to $270m in patient fees for the full year (which would be 19.4% higher than the full FY22 total) and underlying EBITDA of $24m (112% higher than FY22).

This guidance was reaffirmed today.


Will the actual result come in this good?

It would be a shock to see PSQ’s underlying results deviate substantially from this. Nonetheless, this is an unaudited figure.

The statutory results might not be this good because the company will include prior payroll tax estimates and advisory costs.

Back in May, Revenue NSW advised PSQ that it may have underpaid payroll tax dating back to FY19 due to incorrect treatment of its Service and Facilities Agreements. At the time the company estimated the maximum amount due would be $2m-$2.5m, but it ultimately received a bill of just $966,320 including interest but no penalties (on the basis it took reasonable care).

However, PSQ is consulting with other state authorities (specifically Victoria, Queensland and the ACT) to see if it may have underpaid in other states. WA’s payroll tax is clear cut in not imposing tax on relevant contracts.

The statutory result will include consulting costs and an estimate for other jurisdictions.


What about FY24?

PSQ has not given FY24 guidance just yet.

But consensus estimates call for $197m in statutory revenue (up 16% from FY23 consensus) and $33.9m in EBITDA (up 43%). For FY25, $222.6m in revenue (up 13% from FY24) and $40m in EBITDA (up 18%).

You can obtain this for just 9.9x EV/EBITDA and 19.4x P/E. When you consider it is just 0.2x EV/EBITDA-to-EBITDA growth and 0.14x PEG, the company looks even more compelling.

We have previously valued PSQ at $2.29 per share and think it can re-rate over the coming months, buoyed by continuing demand for dental care and a return to normal operating conditions.


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