Blackline Safety Corp. (BLN:TSX.V; BLKLF:OTC) completed a CA$50 million-plus (CA$50M-plus) lease receivables securitization program with CWB Maxium Financial, and consequently garnered a target price increase from Echelon Capital Markets, reported one of the financial firm's analysts, Amr Ezzat, in an April 12 special situations report.
"The new purchase facility is expected to provide the company with enhanced financial flexibility and improved liquidity as management continues to execute its strategic plan and goal of sustained positive adjusted EBITDA exiting full-year 2023," Ezzat wrote.
Echelon raised its target price to CA$4 per share from CA$3.50, and the new figure compares to Blackline's current share price of about CA$2.42, noted Ezzat. From here, the projected potential return for investors is about 65%.
"We have increased confidence in [Blackline's] ability to fund itself and transition into a positive cash flow generator as it continues to improve its financial strength and liquidity in a nondilutive manner," wrote Ezzat.
Though the news warranted a share price increase, the market has not reacted much to it, noted Ezzat. As such, now is an opportune time to invest in Blackline. Echelon recommends it as a Speculative Buy.
Lease Program Popular
Blackline designs, develops and manufactures employee safety monitoring technology with a hardware-enabled software-as-a-service business model. Customers may purchase, lease, or for short-term projects, rent equipment.
Blackline's leasing program is popular with its customers, evidenced in its growth over the past three years, and, Ezzat pointed out, it "provides strong client retention."
The company currently has 270 lease contracts totaling CA$35.4M in gross receivables, with customers including ExxonMobil, Shell, ConocoPhillips, Keyera, Cenovus, and Pembina. Of the total, CA$12M worth consists of the total undiscounted net book value of the leased hardware.
The downside to Blackline's lease program, Ezzat pointed out, is it adversely impacts the timing of the cash flow from it.
He explained that typically "it takes one and a half to two years for a lease contract to catch up to a purchase agreement with service in terms of cash flows."
About the Arrangement
With this newly established partnership, CWB Maxium will purchase receivables generated through Blackline's leasing program. Blackline has 30 days after signing a new customer contract to decide whether to the related lease receivables to CWB.
The program "replaces Blackline's requirement to fully finance its customer lease obligations, with a new purchase facility based on lease purchases of up to CA$15M and US$35M for its safety wearables and area gas monitoring equipment," explained Ezzat.
The program is for one year, at which time CWB Maxium has the option of renewing it.
Benefits to Blackline
The securitization program should boost Blackline's free cash flow by about CA$18M in the remainder of 2023 and CA$15M next year, Echelon estimates.
Along with Blackline's strong cash balance of CA$23.5M at the end of Q1/23, the facility from CWB Maxium will afford the tech company greater financial flexibility and "immediate, nondilutive liquidity while lowering its overall cost of capital," wrote Ezzat.
This, in turn, will allow Blackline to promote leasing as an option more intensely to customers.
|Want to be the first to know about interesting Technology investment ideas? Sign up to receive the FREE Streetwise Reports' newsletter.||Subscribe|
1) Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security. As of the date of this article, an affiliate of Streetwise Reports has a consulting relationship with: None. Please click here for more information.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.
Disclosures For Echelon Capital Markets, Blackline Safety Corp., April 12, 2023
Echelon Wealth Partners Inc. is a member of IIROC and CIPF. The documents on this website have been prepared for the viewer only as an example of strategy consistent with our recommendations; it is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or instrument or to participate in any particular investing strategy. Any opinions or recommendations expressed herein do not necessarily reflect those of Echelon Wealth Partners Inc. Echelon Wealth Partners Inc. cannot accept any trading instructions via e-mail as the timely receipt of e-mail messages, or their integrity over the Internet, cannot be guaranteed. Dividend yields change as stock prices change, and companies may change or cancel dividend payments in the future. All securities involve varying amounts of risk, and their values will fluctuate, and the fluctuation of foreign currency exchange rates will also impact your investment returns if measured in Canadian Dollars. Past performance does not guarantee future returns, investments may increase or decrease in value and you may lose money. Data from various sources were used in the preparation of these documents; the information is believed but in no way warranted to be reliable, accurate and appropriate.
Echelon Wealth Partners Inc. employees may buy and sell shares of the companies that are recommended for their own accounts and for the accounts of other clients. Echelon Wealth Partners compensates its Research Analysts from a variety of sources. The Research Department is a cost centre and is funded by the business activities of Echelon Wealth Partners including, Institutional Equity Sales and Trading, Retail Sales and Corporate and Investment Banking.
Research Dissemination Policy: All final research reports are disseminated to existing and potential clients of Echelon Wealth Partners Inc. simultaneously in electronic form. Hard copies will be disseminated to any client that has requested to be on the distribution list of Echelon Wealth Partners Inc. Clients may also receive Echelon Wealth Partners Inc. research via third party vendors. To receive Echelon Wealth Partners Inc. research reports, please contact your Registered Representative. Reproduction of any research report in whole or in part without permission is prohibited.
Canadian Disclosures: To make further inquiry related to this report, Canadian residents should contact their Echelon Wealth Partners professional representative. To effect any transaction, Canadian residents should contact their Echelon Wealth Partners Investment advisor.
U.S. Disclosures: This research report was prepared by Echelon Wealth Partners Inc., a member of the Investment Industry Regulatory Organization of Canada and the Canadian Investor Protection Fund. This report does not constitute an offer to sell or the solicitation of an offer to buy any of the securities discussed herein. Echelon Wealth Partners Inc. is not registered as a broker-dealer in the United States and is not be subject to U.S. rules regarding the preparation of research reports and the independence of research analysts. Any resulting transactions should be effected through a U.S. broker-dealer.
Company: Blackline Safety Corp. | BLN:TSX
I, Amr Ezzat, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that I have not, am not, and will not receive, directly orindirectly, compensation in exchange for expressing the specific recommendations or views in this report.
During the last 12 months, Echelon Wealth Partners Inc. provided financial advice to and/or, either on its own or as a syndicate member, participated in a public offering, or private placement of securities of this issuer.
During the last 12 months, Echelon Wealth Partners Inc. received compensation for having provided investment banking or related services to this Issuer.