IBIS World assumes that Pacific Smiles has only a 2 percent market share.
With that in mind, you’d think BGH Capital would be able to screw it on if it wanted to without facing any competitive issues.
HBF bought into Pacific Smiles in much happier times at $2.60 a share. The stock closed at $1.26 Monday, down 57 percent year-to-date.
10 times multiple
BGH Capital’s transactions have set some simple precedents when it comes to price. In researching Abano Healthcare and 1300 Smiles, independent experts Caliber Partners and Grant Thornton listed precedents of around 10x EBITDA. They said Pacific Smiles could be worth 13x to 15x, which would be similar to the bid of 1300 Smiles.
Pacific Smiles has forecast underlying EBITDA of $24 million to $27 million for fiscal 2023, down from 2020 and 2021 but better than last year’s $11.3 million shock.
At the midpoint and using 13 to 14 times, Pacific Smiles could be worth about $355 million on an enterprise value basis. The company owes about $100 million.
Shareholders would likely argue that it’s worth more given that earnings are still recovering from last year’s lockdowns, the company’s plans to reintroduce dividends, some new center openings, and the like.