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Fundamental Research gives Kontrol Energy (CSE: KNR) a fair value estimate of $0.83

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Analyst Siddharth Rajeev gives Kontrol Energy a speculative buy rating and a fair value estimate of $0.83 per share, a premium of 315% to the $0.20 closing price on August 23rd, the day the report was issued.

Additional Information:

Company: Kontrol Energy
Stock Symbol: CSE: KNR
Date Published: Sep 6, 2016
Transcript: Available

Video Transcript:

I’m Samantha Deutscher for Investmentpitch Media

Today’s buy recommendation comes from Fundamental Research Corp.

Analyst Siddharth Rajeev gives Kontrol Energy a speculative buy rating and a fair value estimate of $0.83 per share, a premium of 315% to the $0.20 closing price on August 23rd, the day the report was issued.

Kontrol Energy creates solutions and Internet of Things enabled technologies designed to lower the energy consumption of buildings and optimize energy management while providing a corresponding reduction in Green House Gas emissions.
Kontrol’s service offerings include deep energy retrofits, implementation of distributed generation systems, energy analytics and carbon reduction.

In addition to robust organic growth plans, the company seeks to accelerate its revenue and earnings growth by acquiring a controlling interest in operating businesses with the following acquisition criteria:

- a history of profitable operations
- forward EBITDA of $100,000 to $ 3 million
- acquisition price of 3.5 to 4 times forward EBITDA
- strong management that will remain in place

In order to keep the incumbent managers motivated, Kontrol intends to offer managers performance based compensation and other incentive plans.

The company recently entered into an agreement for the procurement, purchase and installation of two 140 kilowatt cogeneration systems for a customer in Ontario.

The base contract price is $1.21 million, with an estimated gross margin of 15%, and an expected completion date of October 2016.

With the current low cost of natural gas, relative to the high cost of electricity, cogeneration is attractive for commercial and industrial applications, and in Ontario may qualify for up to 40% in capital cost rebates.

In aggregate Kontrol Energy is operating at approximately an annual revenue run rate of $2 Million.

Analyst Siddharth Rajeev stated: “Management intends to pursue up to $15 million in acquisitions over the next 12 months. If the acquisition price averages 4x EBITDA, we estimate Kontrol will be able to generate approximately $25 million in revenues and $3.75 million in EBITDA. Our discussions with management indicated that their goal is to reach $50+ million in revenues by 2020 through organic growth and through acquisitions.”

The company is looking to raise $5 million through a non-brokered private placement of $1,000 debentures.

The private placement is by way of Offering Memorandum allowing both eligible and accredited investors the ability to participate across Canada subject to National Instrument 45-106.

The 3-year debentures will pay 8% per annum with 100 Common Shares attached to each $1,000 debenture providing for equity upside participation.

Paul Ghezzi, CEO, stated: "Financing acquisitions through the Debenture offering provides Kontrol with the ability to minimize common equity dilution and accelerate our growth plans. Each acquisition we complete is anticipated to be accretive to revenue, operating cash flow and EBIT. Private company valuations remain very attractive, relative to public company valuations, and Kontrol has a number of strategic acquisitions in various stages of preliminary due diligence."

The company began trading on the CSE on August 9th, following a reverse take over.

Kontrol Energy is trading at $0.40, almost double its closing price from its first day of trading, but well below the $0.83 target price. With only 16.7 million shares outstanding the company is capitalized at $6.7 million, with management and insiders owning approximately 80% of the outstanding shares.

For more information please visit the company’s website, contact Paul Ghezzi, CEO, at 905-766-0400 ext. 1001 or email

I’m Samantha Deutscher for Investmentpitch Media