Significant discussion of KNR's achievements and projection of revenue flow.From Fundamental Research Inc.
"Investment Highlights Kontrol Energy Corp. (“company”, “Kontrol”) completed their second acquisition in December 2016, and third in February 2017. ? Subsequently, Kontrol announced letters of intent (“LOI”) to acquire two other entities – one for $31 million and the other, we estimate, for approximately $2 million. ? The company’s focus continues to be on entities with the potential to generate long-term recurring revenues. ? In Q1-2017, the company generated $1.15 million in revenues, and reported a net loss of $0.27 million (EPS: - $0.01). ? We forecast revenues of $12.42 million in 2017, and $22.30 million in 2018. ? Kontrol’s primary focus is on acquiring operating companies and/or technologies that can control energy consumption and energy usage. “The emerging and rapidly growing Internet of Things (IoT) market is expected to play a vital role in this sector.
Kontrol’s first acquisition was Kontrol Technologies Inc. Founded in 2012, Kontrol Technologies offers turn-key energy efficiency retrofit services for commercial and multiresidential buildings, focusing on energy efficiency, conservation and sustainability. Their clientele (primary focus on Ontario) includes large REITs and property management firms. Second Acquisition In December 2016, the company completed the acquisition of Ontario based, and privately held, Log-One Ltd.’s Energy Management System (EMS) for $0.25 million in cash, and 1 million common shares, for a total valuation of $0.80 million. Log-One will also receive a royalty of approximately 5% of the manufacturing cost of each unit sold for 10 years. EMS is a smart, occupancy based heating and air-conditioning control product (with a patented technology) designed for commercial and industrial use. Over 10,000 units have been installed and operating across Canada over the past 10 years. The technology is reported to have resulted in energy savings of 24% - 33% for multi-residential buildings, and 30% - 40% for classrooms and offices. Since the acquisition, the company has rebranded the acquired entity as Kontrol EMS, and is currently upgrading to a next generation EMS technology. The upgraded version will include Internet of Things (IOT) capability and is expected to improve energy savings from 25% p.a. to over 30% p.a. It will be offered to customers for long-term (5 to 10 years) contracts, and no upfront payments. Management expects to commence sales of the new version by Q4-2017. Their guidance for 2017 is $2 - $4 million in revenues, with a gross margin of 50%. Third Acquisition In February 2017, Kontrol acquired Ortech Consulting Inc. for $4.20 million in cash. Kontrol had announced an LOI related to this acquisition back in September 2016. Ortech is an engineering consulting firm with a 20-year track record in Green House Gas (GHG) reporting, air quality testing, emission testing and renewable energy/power consulting. Their client base includes large oil and gas companies, and a significant portion of their revenues are through recurring multi-year contracts. In 2016, Ortech generated $5.3 million in revenues and $0.94 million in EBITDA. Fourth Acquisition In February 2017, the company announced a LOI to acquire an undisclosed Energy Engineering company for an undisclosed price. The target has a 20-year track record in offering engineering services to industrial, municipal and commercial building owners across Canada. Its primary services include - energy efficiency analysis, energy audits, management of facility system solutions, electrical and mechanical design and energy conservation studies. In 2016, the target generated $2 million in revenues and approximately $400k in EBT. This transaction is expected to close next month. Fifth Acquisition In May 2017, Kontrol entered into another LOI to acquire up to 20 MW of solar powerPage 3 ? 2017 Fundamental Research Corp. “10+ Years of Bringing Undiscovered Investment Opportunities to the Forefront “ www.researchfrc.com PLEASE READ THE IMPORTANT DISCLOSURES AT THE BACK OF THIS REPORT Financials generation assets in Ontario. The projects have long-term (18 years remaining) power purchase agreements (PPAs) with the Government of Ontario Feed-in Tariff program. According to management, these projects generate combined revenues of $10 million, EBITDA of $7.5 million, and net cash flows of $3 million per year. We consider this a strong acquisition given management’s background in operating solar power generation assets. The acquisition price is estimated at $31 million, of which, 80% will be paid with units of Kontrol. Each unit will consist of a common share and one-quarter warrant (exercise price - $2.50 for 3 years). The remaining 20% will be paid in cash. The transaction is anticipated to close by September 2017. We believe the acquisition price is in line with the industry average multiple of $3/W.
We are introducing our revenue and EBITDA forecasts for 2017 and 2018 in this report. Our revenue forecast for 2017 is $12.42 million, with an EBITDA of $1.98 million. Our 2018 forecasts are $22.30 million in revenues and $3.40 million in EBITDA."
