Blackline Safety is still undervalued, Beacon Securities says

Following the company’s second quarter results Beacon Securities analyst Gabriel Leung is still bullish on Blackline Safety Group (Blackline Safety Group Stock Quote, Chart, News: TSXV:BLN).

This morning, Blackline reported its Q2, 2018 results. The company lost $2.9-million on revenue of $3.8-million, a topline that was up 49 per cent over the same period last year.

“Our award-winning G7 product line launched just over six months ago continues to drive Blackline’s top-line growth,” CEO Cody Slater said. “Product and service revenue grew significantly, up 49% compared to last year. Even stronger growth was shown in our contracted future service revenues, up 83%, generated by customers adopting G7 through our leasing program. With the recent introduction of our new G7 Insight program, we have expanded our target market to include replacement of ordinary beep-and-flash’ gas detectors currently offered by traditional gas detection suppliers,” said Slater. “Not only has G7 Insight generated considerable interest within our channels, it solves one of the biggest problems for businesses that our competitors have not been able to address the ongoing need to prove compliance with legislated safety regulations.” He added, “Every business using gas detectors must ensure that all equipment is regularly tested, periodically calibrated and continuously used by their personnel. G7 Insight combines wireless technology, an online compliance dashboard and business analytics software to deliver the world’s first hands-free, comprehensive live view of compliance.”

Leung notes that Blackline’s topline bested the $2.9-million he had modeled. He says things are looking up for the company.

“Overall, we believe the company continues to make good progress in the portable gas detection market, which we view as a market comprised of ~5.3M end users representing ~$3.5B in potential annual recurring revenues (based on BLN’s ~$55 monthly lease plan for single-gas detection). We continue to view 2018 as a key year for new account wins.”

In a research update to clients today, Leung maintained his “Speculative Buy” rating and one-year price target of $8.25 on Blackline Safety, implying a return of 33 per cent at the time of publication.

Leung thinks Blackline will generate EBITDA of negative $5.2-million on revenue of $14.2-million in fiscal 2018. He expects those numbers will improve to EBITDA of negative $1.6-million on a topline of $18.6-million the following year.