WITH ALL THIS GOING FOR IT.......IT STILL TRADES LIKE A BANKRUPT STOCK......ALTHOUGH FAR FROM IT...
We Think That UDHI is Worth Another Look
Posted Tuesday, January 13th, 2009 in Blog, Newsletter, Stocks To Watch by Editor
Tags: Dentist, UDHI, UDHI.ob, Union Dental Holdings Inc.
In a move that we feel should help drastically bolster the company’s future financial position, Union Dental Holdings Inc (OTCBB: UDHI) recently made the leap from middleman to total service provider (TSP) by establishing its first full service dental facility in Coral Springs, FL.
While many of the top dogs in industries once thought impervious to economic downturn such as gaming and pharmaceuticals faltered in 2008, UDHI solidified its position as a leader in a recession-resistant market and became one of the top small-cap turnaround stories of the year. After recording a loss of nearly $810K during the first 9 months of 2007, UDHI had generated net income of more than $24K by the end of Q3 2008 on almost identical revenues of $1.9M.
The company’s CEO now owns 38.4M of the 115M shares outstanding and the stock is trading at more than a 95% discount to its 52-week high of $.05.
Due to the potential of today’s announcement, UDHI’s recent significant financial improvements, and its CEO’s willingness to shell out his own hard earned green backs to scoop up shares on the open market, we feel strongly compelled to re-evaluate the company and its future growth potential. We think you should too.
Value Proposition
For those of you that are unfamiliar with Union Dental, they do just what its name implies. It provides dental services to the more than 15 million U.S. labor union workers.
Dental Coverage and Union Dues in One Shot:
The annual out-of-pocket savings for an individual union member using the Union Dental network are typically greater than membership dues. So, in theory, a union worker could use UDHI’s program and save enough money using their dental benefits to pay their annual union dues.
With the paycheck of the average American now spread thinner than ever, UDHI’s ability to pass on a major discount to labor union workers in many instances is a major competitive advantage.
Labor Union Dentistry is Recession-Resistant:
As the U.S. population expands and ages, demand for non-discretionary dental services amongst labor union workers is growing despite a struggling economy and should remain steady so long as benefits continue to be made available.
Surely, the ongoing rise in unemployment is negatively impacting labor union enrollment and to some extent shrinking Union Dental’s target market. However, the company does have a growing pool of more than 15 million workers to target with its services and should not have to worry about running out of potential clients for quite some time, if ever.
To give you an idea of just how large UDHI’s market opportunity is and how little penetration the company would need to achieve to become grossly successful, 25% adoption among CWA union members alone (assuming each member had 3 dependents) would generate demand exceeding $1 billion in dental services annually.
UDHI Services a No-Brainer for Labor Union Workers
From what we’ve read, roughly 1/3 of Americans are without dental insurance, about ½ of all dental procedures are paid for out-of-pocket, and the average union worker has three (3) dependents.
Due to these facts, dental coverage has long been a key bargaining chip for labor unions as they look to attract new workers. In a testament to the popularity of dental benefits amongst U.S. labor union workers, U.S. Department of Labor’s Bureau of Labor statistics reveal that 92% of labor union workers opt for dental coverage if offered.
A Major Step in the Right Direction
The new Coral Springs facility represents the progression of UnionDental’s business plan into a new stage of growth.
Initially, the company generated revenue by establishing relationships with U.S. labor unions whereby UDHI becomes the exclusive provider of dental services in pre-determined geographic areas.
Once rights are obtained, Union Dental then “rents” out the areas of exclusivity to local dental providers and charges them an annual fee to access labor union clients in the specific region. To date, UDHI has expanded its dental network to include nearly 2,000 providers and a customer bases possessing more than $200,000,000 in annual spending power.
Phase 2 Initiated
Now, in addition to building out its network further, Union Dental has started establishing its own full service dental facilities in regions with heavy concentrations of labor union workers, beginning with its home turf of Coral Springs, FL.
This new facility will provide all aspects of dentistry under one roof including Orthodontics, Endodontics, Periodontics, Implants, Pedodontics, Cosmetic Dentistry and Oral Surgery.
Coral Springs Could Become One of Many
It’s important to note that UDHI has come close to establishing full service facilities in Southern California and Charlotte, North Carolina over the past year and could in fact pursue additional opportunities if its first full service facility is as lucrative as they think it will be.
A New Day for UDHI
It appears that UDHI’s best days have yet to come.
With the share price beaten down severely, business trends improving a CEO who continues to scoop up his own company’s shares on the open market, a little of the guess work is taken out of the equation.
Surely, there’s a great deal of risk involved with this stock as there is with any sub-penny venture. However, with net income improving and a major tangible asset now on the books, the risk today is likely less than it was yesterday.
It is hard not to like UDHI’s business plan, and it appears that the plan is now coming to fruition. As we always say, one key characteristic that we always look for in successful small-cap ventures is management’s ability to identify objectives and fulfill them. UDHI has done just that.
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