Stock Idea…K-BRO Linen Inc.

Stock Idea…K-BRO Linen Inc.

Symbol : KBL

Exchange: TSX

Market Cap : 399.3 Million

Revenue : 171 Million
Three Year Revenue Growth : 17.9 %
Investment Type : Small Cap Value/Growth

Price/Earnings : 71.1

Forward P/E : 37.3

Price/Book : 1.9

Price/Sales : 2.0

Price/Cash Flow : 21.4

Price : 38.00

Dividend Yield : 3.19
Investment Stem : Stephen Takacsy of Lester Asset Management

K-Bro Linen Inc is a Canada-based owner and operator of laundry and linen processing facilities. The Company provides laundry and linen services to healthcare institutions, hotels and other commercial accounts. The Company's services include the processing, management and distribution of general and operating room linens (K Bro Operating Room (KOR) Services), including sheets, blankets, towels, tablecloths, surgical gowns and drapes, and other types of linen. Other types of processors in the Company's industry in Canada include independent privately-owned facilities (small and single facility companies), public sector central laundries, and public and private sector on-premise laundries (OPLs). Its healthcare customers include hospitals and long-term care facilities. K Bro Linen Systems Inc is the subsidiary of the Company.

The dreaded metrics from Morningstar…

http://quote.morningstar.ca/Quicktakes/stock/keyratios.aspx?t=KBL&region=CAN&culture=en-CA&ops=clear

The company’s website…

http://www.k-brolinen.com/

Canadian leader in laundry and linen services to the growing health-care and hospitality industries. High barriers to entry and limited competition. K-Bro has 30 per cent market share in Canada with long-term contracts at high renewal rates. It is the lowest cost producer and is nearly finished a major capex program to build new plants in Ontario and B.C., which will increase capacity and lower costs and allow K-Bro to widen its lead over the competition. Recently acquired Fishers Topco in Scotland. Stock has come down due to transition costs of new plants and minimum-wage increases, which the company can pass on to most customers within a year. We expect improving margins as costs are absorbed and K-Bro wins more business. It is now a great buy at 9x 2009 EBITDA. Pays a 3.3 per cent dividend.

They have been investing heavily in new plant and equipment. This is a great entry point. They are lowering their costs. They have 30% of the Canadian market and the next biggest player is very weak. There are one time start up costs.  This is when you want to invest in these kinds of companies. You get a great dividend while you wait for higher margins.

Update on K-BRO Linen Inc...as of June 14 2018

Canadian leader in laundry and linen services to the growing health-care and hospitality industries. High barriers to entry and limited competition. K-Bro has 30 per cent market share in Canada with long-term contracts at high renewal rates. It is the lowest cost producer and is nearly finished a major capex program to build new plants in Ontario and B.C., which will increase capacity and lower costs and allow K-Bro to widen its lead over the competition. Recently acquired Fishers Topco in Scotland. Stock has come down due to transition costs of new plants and minimum-wage increases, which the company can pass on to most customers within a year. We expect improving margins as costs are absorbed and K-Bro wins more business. It is now a great buy at 9x 2009 EBITDA. Pays a 3.3 per cent dividend. We recently added to our position at $35.