Kontrol Energy Corp. (CSE: KNR) (OTCQB: KNRLF) has been on a roll of achieving milestones and executing lately. These accomplishments include KNRs’ subsidiary CEMSI conducting a pilot program with a global leader in the plant-based meat substitute industry, the second pilot test with Toyota Tsusho Canada Inc. and an upcoming closing of a financing and acquisition. Here is a rundown of catalysts which investors should keep an eye out for.
For all the reasons we outline below and assuming KNR management continue to execute with excellence, we believe that the KNR chart for the next 6 months or 180 days may look something like this.
Kontrol Energy is currently in the process of completing a convertible debt financing which has a conversion price of CAD $0.80 cents which represents an increase of 31% from Kontrols’ current share price of $0.55.
Furthermore, Kontrol is also in its final stages of it’s due diligence for the recently announced intention to acquire an unnamed Canadian electrical efficiency services and retrofit company. This acquisition would increase revenues for KNR as the target has generated over CAD $6.5 Million in revenues over the past 3 years with approximate EBITDA of $700,000 over the same period.
Another catalyst which investors need to pay attention to is from the press release dated September 11th where Kontrol secured a pilot contract with a global leading plant-based meat substitute company.
Under the agreement, KNR will provide analysis equipment known as “the Analyzer” and associated installation and monitoring services to assist in the rapid evaluation, measurement and validation of organic inputs. The pilot for the installation is valued at USD $150,000 and may require up to 10 analyzers per location. This would value each location at approximately USD $1,500,000 with an unknown quantity of locations to subsequently install at. We anticipate that Kontrol Energy will provide further updates on this in the coming weeks as it was stated that the pilot operation will run for approximately 30 to 45 days.
After many months, Kontrol announced on November 26, 2019 that it has completed a successful pilot with a global leading plant-based meat substitute company. Under the agreement, Kontrol’s subsidiary CEMSI Specialties Inc., have installed process analyzer equipment and associated real-time monitoring services which will assist the plant-based meat company in rapid evaluation, measurement and validation of organic inputs. Thus far, the value of the installation and services provided is approximately USD $150,000 and the press release also stated that the customer intends to purchase 2 additional units for a total of USD $300,000. Also noteworthy in the press release is that the purchase order is expected to be placed within two weeks after the completion of the pilot and that the customer has also indicated that the global plant-based meat substitute company will be named in a joint press release!
Furthermore, Kontrol Energy recently announced that its wholly owned subsidiary CEM Specialties Inc. has entered the Saudi Arabian energy and emission compliance market. Kontrol entered the Saudi market as its subsidiary has signed a letter of understanding with a new regional partner the Zedan Group. This new letter of understanding will enable the partner Zedan group to distribute Kontrol Energys’ emission compliance and energy IoT and cloud technology. Adam Majzoub, Business Development Manager for Zedan states “The Zedan group is a conglomerate that is focussed on engineering, procurement and construction in the infrastructure and energy sectors, with customers including large integrated national and global leaders such as Saudi Aramco, SABIC, Al Khafji Joint Operations (KJO) and Saudi Electricity Co,". We expect Kontrol Energy will benefit greatly from this new relationship and we look forward in the Company announcing more developments in this regard.
Additionally, Kontrol is set to announce their third quarter (Q3) results by the end of November as their Q2 came to an end on June 30th 2019. If we look at the most recent quarter, KNR has posted $7.6 Million in revenues for the 6-month ending June 30th. These revenues on average would generate approximately $3.8 Million per quarter and is in line as the Company posted revenues of $3.9 Million for the quarter, up 93% over the comparative quarter in the prior year. If we use our average of $3.8 Million per quarter on a continual basis, then we could estimate that Kontrol Energy may post revenues approximately $11,400,000 for the Company’s third quarter or $15,200,000 for the company’s year end. This estimation is based on current metrics and does not account for any future growth the Company may acquire.
Now, looking at what we could consider fair value for Kontrol Energy, we would base our estimates on a 4x sales metric. Based on our estimation of $15.2 Million for annual revenues, this should KNR a total market capitalization of $60,800,000. If we consider that there are currently 29.2 Million shares outstanding, this gives us a total of $2.09 per share!
With consistent topline growth both organic and from M&A, an acquisition about to be closed, further expansion with Toyota and additional information on a successful pilot with a plant-based meat substitute company, KNR is about as good as a risk/reward setup as we have seen in this market with a potential return in excess of 300%.
All figures in Canadian Dollars (CAD) unless otherwise specified.
Forward Looking Statements: This article may contain "forward-looking information" (as defined in applicable Canadian securities legislation) that is based on expectations, estimates and projections as of the date of the content is published on this website. Wherever possible, words such as "anticipate", "believe", "expects", "intend" and similar expressions have been used to identify these forward- looking statements. Information in this article has been furnished for your information only, is accurate at the time of posting, and may be superseded by more current information. Except as required by law, we do not undertake any obligation to update the information, whether as a result of new information, future events or otherwise. This article should not be considered as personal financial advice. Full Disclosure: The company Kontrol Energy Corp. is a paid client of Equity Insight. Directors of Equity Insight may buy, hold or sell the securities before during or after this publication.