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rasaj

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11/04/20

16:04

Post #: 43999812
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Originally posted by stan255: ↑

Yes, it does tick a lot of boxes.

1. Operates in a defensive industry (healthcare).
2. Has a simple growth strategy (roll outs / growth by opening more stores not roll ups which is growth by acquiring competitors).
3. It's business model is different and IMO much better than its existing DSO competitor in the ASX.
4. Management has skin in the game.

I published my view on PSQ over the ONT thread when the price was around the 1.25 mark.

Here it is.

After comparing both companies, PSQ (IMO) is a higher quality business.

The biggest difference is the business model. PSQ is a roll out (growth by building new centres). ONT is a roll up (growth by acquisition).

IMO PSQ's business model is more sustainable than ONT. PSQ build their own dental centres whereas ONT is dependant on acquiring them. Not saying one is better than the other but building your own has lower risks than growth by acquisitions.

One of the risks being the culture that you are acquiring. The second is the inherent risks of roll ups which we all know from previous ASX-roll ups.

When it comes to building, new centres are cash flow positive by year 2 and returning close to 50% of your capital after year 4.

1. On average, it costs 800-900k to build a new centre with 2 chairs.
2. By year 2, the centre will be cash flow positive.
3. Centres which are 4 years and older with 5 chairs generate approx $500k in EBITDA.

I don't know about you but $500k EBITDA from an initial capex (excluding expansion capex) of close to $1m is a pretty good deal to me. That is close to 50% ROIC.

If you look at it from a ROE point of view, PSQ generates much higher ROE than ONT. Plus, the ROE doesn't drop off as much compared to ONT because of their business model.

Over the past 7 years, PSQ's ROE has been stable and averaging over 55%.

P.S: I use EBITDA as my numerator.

In terms of management, Alex, the founder of PSQ is also a very smart man. Here is an one-hour long interview with him for anyone interested:

I have listened to multiple executives in the past and you can tell Alex is super smart. He thinks for himself as opposed to other executives who just follow the herd. Reminds me of a Charlie Munger.

From a valuation point of view, PSQ is way cheaper than ONT.
In FY18, PSQ patient fees are 164m vs ONT's 56m.
Market cap 190m vs 147m.

So we have a company that generates close to 3x the patient fees while trading at only a 30% premium.

Just my 2c. Of course, do your own research.

Read the prospectus of PSQ and go listen to the interview and you will see why I prefer PSQ over ONT.

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I'm new to investing and have been thinking about PSQ. This looks like detailed analysis and was wondering what your thoughts are in relation to their occupying premises within shopping centres? Does the circa 2 year payback period still hold true for these?

I quite like their concept and especially at their current price, it feels reasonably cheap, with significant room for continued growth.

PSQ Price at posting: $1.10 Sentiment: Buy Disclosure: Not Held
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0 Great analysis

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