Blackline Safety has a 150 per cent upside, says PI Financial

PI Financial analyst Jason Zandberg provided an update on Wednesday on connected safety tech company Blackline Safety (Blackline Safety  Stock Quote, Charts, News, Analysts, Financials TSX:BLN), saying the company’s new source of funds will be a nice boost to cash flow. 

Calgary-based Blackline Safety has connected safety hardware for in-the-field gas monitoring as well as cloud-connected software and data analytics, with business now in over 100 countries.

Blackline announced on Tuesday a new securitization program with CWB Maxium Financial, which will purchase receivables from the company’s leasing program. Blackline has flexible buying options for customers whereby they can purchase, lease or rent products. Thus, in order to improve its liquidity, the securitization program will give Blackline the option of selling its lease receivables to CWB Maxium within 30 days of signing a new customer contract.

“Combined with our solid cash position of $23.5 million at the end of our fiscal first quarter, this new facility significantly bolsters our financial flexibility and provides us with immediate, non-dilutive liquidity while lowering our overall cost of capital and broadening our banking relationships,” said Blackline CEO and Chair, Cody Slater.

Blackline said the terms of the program are a renewable one-year term and it’s based on lease purchases of up to $15 million and US$35 million for its safety wearables and area gas monitoring equipment.

Blackline’s share price shot up almost eight per cent on Wednesday, but the stock remains well off its highs set in mid-2021. BLN went from about $9 in June of 2021 to sub-$1.00 territory by September 2022 before climbing to the mid-$2.00 range where it’s been trading for much of 2023. Year-to-date, the stock is up 43 per cent.

But Zandberg sees plenty of upside to come, reiterating in his update a “Buy” rating and $6.00 target price, which represented at press time a 12-month projected return of 150 per cent.

Zandberg judged the impact of the securitization program to be a positive for Blackline.

“This new financial resource will enable BLN to more aggressively market its leasing option in which the customer has no upfront purchase of equipment. This option is popular with customers but, before this new securitization program, placed a strain on BLN’s cash flow,” Zandberg wrote.

“We believe that this program will assist its objective of achieving positive Adj. EBITDA along with providing BLN with increased financial flexibility and improved liquidity,” he said.