Blackline Safety Group is undervalued, PI Financial says

BlackLine Safety Group (BlackLine Safety Group Stock Quote, Chart, News: TSXV:BLN) is a potential game changer with a huge lead on its competition, says PI Financial analyst David Kwan.

In a research report to clients today, Kwan initiated coverage of Blackline Safety Group with a “Buy” rating and a one-year price target of $7.75, implying a return of 68 per cent at the time of publication.

Calgary-based Blackline Safety Group markets and sells the “G7”, a series of products designed for portable and connected gas detection. Kwan says his research revealed a company that should be on investor’s radar. He believes the company is “poised to generate exceptional and accelerating organic growth”.

“We believe G7 is a game changer with a potential multi-year lead time advantage,” the analyst adds. “Based on our conversations with some of Blackline’s distributors, the G7 platform is on the cutting edge and significantly better than any other solution on the market. Consequently, they are seeing significant inbound interest from end customers that should drive purchase orders in the coming quarters and years (like the $2.3M purchase order in early August). Our due diligence suggests that G7 may have at least a year or two lead time advantage versus its competitors.”

Kwan thinks Blackline will generate Adjusted EBITDA of negative $6.5-million on revenue of $10.0-million in fiscal 2017. He expects those numbers will improve to EBITDA of negative $3.5-million on a topline of $15.2-million the following year.

Kwan notes that this is an early stage opportunity and investors must consider the inherent risk that comes with that, but says much of it is mitigated by other positives.

“The risk profile is elevated given we are in the very early stages of the G7 rollout but with a large, well-established end market, a leading edge and revolutionary product (with a potential multiyear lead time advantage), a proven and experienced management team with strong existing partner and customer relationships, and a cashed up balance sheet, we believe the key pieces are in place to drive success at Blackline and the share price higher,” he says.