K-Bro Linen Inc (KBL.TO)

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

The balance sheet is in good shape. They have been building new plants in Toronto and Vancouver and developing new markets in the UK. There is about 1.4 times debt to EBIDA, so there are no concerns.

(A Top Pick Jun. 26/17, Down 3%) They have been investing heavily in new plant and equipment. This is a great entry point. They are lowering their costs. They have 30% of the Canadian market and the next biggest player is very weak. There are one time start up costs. This is when you want to invest in these kinds of companies. This is a great entry point and he added to his position recently. You get a great dividend while you wait for higher margins.

There is a lot of weird trading at year-end. You have portfolio managers changing, Short covering, sector reallocation and tax loss selling. He would bet this company’s problem is year-end positioning. A nice solid company. Wouldn't put it in the high growth category. If markets are going to go on a tear, this will underperform. If the market does go down, you are going to be glad you owned it. They sign 10-year facility contracts with their customers.

This has been moving up significantly. Doesn't know if they have new contracts, but over the last few years, they’ve gained a lot of market share in the markets they are in. A smaller company, but extremely well-managed.

Chart shows this has come back to the base of about $40, which was a break out in 2014. If it can get above the last trend line, that would be pretty positive.

This is a boring stock. They wash linins for hospitals and industrial. They have long term contracts and definitely are a safety company. It will not get killed to badly with interest rates.

A very steady business. Just built a new plant in Toronto. There is a potential for them to make an acquisition or to build a plant in Vancouver. His concern is that when they have built plants in the past, it’s taken time to fill the capacity of them. He is cautious. On top of that it has always been pricey as a stock. Hard to see where the upside is in terms of valuation. Dividend yield of 3.1%.

It is not interest rate sensitive. There are big moats around the business. They are modernizing several of their plants and can increase their margins going forward. It is in a consolidation phase as new plants come online. You will have to wait a few quarters if you get in.

They have done a really great job of consolidating the industry in Canada. It is expensive to add new capacity. He would be adding to the position. It is a defensive and conservative position. They could increase their dividend.

He looks at peaks and troughs, and the chart looks like it may be basing. You want to see it break the lid of basing of around $44.