Opinions
Ryan Bushell
K-Bro Linen Inc
KBL-T
PAST TOP PICK
Apr 11, 2023
Stock price when the opinion was issued
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Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research. Dividend yield of 4.0% Stable industry growth and good annual recurring revenues. Geographic diversification across Canada and the UK. Opportunity for future acquisitions. Unlock Premium - Try 5i Free
Likes the managers whom he recently met. Last year was crazy because of European gas prices, especially in the UK where they operate raised their expenses. They're in a stable business and are well-run. Lots of free cash flow that could lead to buybacks and/or dividends. He added on dip earlier this year. KBL is adding capacity that could raise the dividend.
Not the most exciting until you look under the hood. Its M&A cadence is picking up with more deals done recently. Stable business with long-term contracts, recurring revenue. Hospitality, but also healthcare. Finally starting to see more volume since Covid. Great business, generates a lot of cash, yet trades at only 6-6.5x EBITDA. Right in the crosshairs of private equity.
Once it makes an acquisition, it can use its size, scale and know-how to grab more contracts from that geographic area. Don't forget -- they have to pick the stuff up and then deliver it after they clean it. That know-how is really valuable, and they can do it at quite a margin. 15-20% EBITDA margins on contracts.
It is a solid business, very much under the radar. It is well run with an excellent management team. In 2022 there was a 20% increase in natural gas prices in the UK but it has worked its way though that. It has a strong business with the medical profession. He doesn't want it taken out..
Buy 6 Hold 0 Sell 0
Their business has moved more into healthcare. Last year was hit by extreme gas price movements in the UK. He thought they were protected from inflation when he bought it, though. A stable, underknown business that cranks out cash flow. Likes management.