On April 1, 2025, Atrium Research analyst Nicholas Cortellucci maintained a Buy rating and CA$0.35 target price on Kontrol Technologies Corp. (KNR:CBOE.CA; KNRLF:OTCQB; 1K8:FSE), highlighting that the company is trading at a discount to its net cash position and has significant upside potential as it shifts toward operating profitability in 2025 and deploys capital on strategic acquisitions.
Kontrol Technologies reported Q4 2024 financial results that were in line with analyst expectations, with revenue of CA$1.7 million compared to the estimate of CA$1.8 million and adjusted EBITDA of negative CA$0.3 million versus the estimate of negative CA$0.2 million. For the full year 2024, the company reported revenue of CA$10.9 million and adjusted EBITDA of negative CA$0.5 million, both close to the analyst's forecasts. Despite the negative EBITDA, Kontrol posted na et income of CA$12.2 million for 2024, largely due to a CA$13.2 million gain from asset sales in Q2.
The company ended 2024 with a strong financial position, holding CA$12.6 million in cash and equivalents against just CA$0.4 million in debt. This cash position, equivalent to CA$0.22 per share in net cash, exceeds the company's current market capitalization of CA$8.7 million, resulting in a negative enterprise value. The cash consists of CA$2.1 million in cash, CA$7.0 million in GICs/fixed income, and CA$3.6 million in iShares Bitcoin Trust ETF and related call options.
During 2024, Kontrol repurchased 1.8 million of its own shares for CA$450,000, decreasing its outstanding shares by 3% from 2023. This buyback activity has continued into 2025, with the company repurchasing an additional 734,000 shares (over CA$100,000), representing a further 1% reduction in outstanding shares. CEO Paul Ghezzi has also demonstrated confidence in the company by purchasing approximately CA$42,000 worth of shares in Q4.
Management continues to focus on the company's strategic direction, reviewing multiple acquisition opportunities to deploy its substantial cash reserves. The company is targeting tuck-in acquisitions in the HVAC and smart building technology sectors, which operate in markets with long-term secular growth driven by increasing electricity costs, aging infrastructure, electrification, and emission reduction requirements.
Cortellucci attributes the stock's current negative enterprise value to investor impatience, as the company has held its large cash position for three quarters without completing an acquisition. He expects this situation to reverse in the coming quarters if management can announce definitive acquisitions and return to profitability. The CA$0.35 target price is based on 8x 2025E EBITDA, representing a potential return of 126% from the share price at the time of the report of CA$0.155.
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Disclosures for Atrium Research, Kontrol Technologies Corp., April 1, 2025
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