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1. Company Snapshot

1.a. Company Description

K-Bro Linen Inc., together with its subsidiaries, provides laundry and linen services to healthcare institutions, hotels, and other commercial organizations in Canada and the United Kingdom.Its services include processing, management, and distribution of general and operating room linens, such as sheets, blankets, towels, surgical gowns, and drapes and other linens.The company also offers other services, including bulk dock-to-dock, exchange cart preparation, cart delivery, surgical linen, distribution and control of employee uniforms, personal clothing, customer reporting, customer service visiting, and textile procurement services.


In addition, it provides linen rental, workwear hire, and cleanroom garment services.K-Bro Linen Inc.was founded in 1954 and is headquartered in Edmonton, Canada.

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1.b. Last Insights on KBL

K-Bro Linen Inc.'s recent performance faces challenges due to margin pressures despite a 49% revenue surge driven by strategic acquisitions. The company's Q3 2025 earnings call highlighted increased costs, which may impact profitability. Additionally, while the appointment of the Honourable Rona Ambrose to its Board of Directors brings new expertise, it may not immediately offset the effects of rising expenses. The company's record Q3 revenue and EBITDA may be overshadowed by these margin challenges.

1.c. Company Highlights

2. K-Bro Linen Systems' Stellar Q3 2025 Earnings: A Record-Breaking Performance

K-Bro Linen Systems reported a record-breaking Q3 2025, with revenue surging to $156 million and adjusted EBITDA reaching $33.5 million. The Stellar Mayan acquisition, completed in June 2025, significantly contributed to this impressive performance, driving a 49% increase in consolidated revenue compared to Q3 2024. Notably, healthcare revenue jumped 67% and hospitality revenue rose 34%. However, the adjusted EBITDA margin dipped to 21.5% from 22% in 2024 due to the lower margin profile of Stellar Mayan. Net earnings increased to $8.9 million, or 8.9% of revenue, up from $8.1 million in Q3 2024. The actual EPS came out at $0.929, significantly beating estimates of $0.03.

Publication Date: Nov -23

📋 Highlights
  • Record Revenue Growth:: Q3 2025 revenue surged to $156M (+49% YoY), driven by 67% healthcare and 34% hospitality revenue growth.
  • Acquisition Impact:: Stellar Mayan acquisition (June 2025) expanded U.K. footprint, contributing to national healthcare and hospitality market penetration.
  • Margin Pressure:: Adjusted EBITDA margins declined to 21.5% (from 22%) due to Stellar Mayan’s lower-margin profile, despite $33.5M EBITDA.
  • Strong Cash Distribution:: Distributable cash of $19.6M with a 20% payout ratio, supported by a robust balance sheet and undrawn credit facility.
  • Future Growth Catalysts:: $5B Canadian healthcare infrastructure fund and $4M+ Stellar Mayan CapEx planned, targeting medium-term expansion in Canada/U.K.

Operational Highlights and Growth Prospects

The Stellar Mayan acquisition has established K-Bro Linen as a strategic supplier to the U.K. healthcare sector, mirroring its position in Canada. The company expects mid-to-mid-single-digit organic growth in Canada, driven by solid growth in Quebec and Toronto markets. The healthcare and hospitality segments continue to experience steady growth trends, with expectations for activity levels to remain strong. As Ms. Ambrose's addition to the Board brings a valuable skill set, particularly in government and corporate boards, K-Bro is poised to deliver industry-leading service and achieve cost synergies from the acquisition.

CapEx and Funding

The company's guidance on CapEx remains unchanged, with $2 million to be spent over the balance of 2025 and ongoing CapEx to be incurred fairly evenly over 2026's four quarters. For Stellar Mayan, $4 million has been committed so far, with $3 million to be spent in Q4 2025. The Canadian federal budget's $5 billion healthcare infrastructure fund is expected to positively impact K-Bro Linen, as adding beds requires more linen, boosting medium-term growth.

Valuation and Outlook

With a P/E Ratio of 21.09 and EV/EBITDA of 10.32, the market seems to have priced in a significant level of growth. Analysts estimate next year's revenue growth at 18.0%. The company's strong balance sheet, ample undrawn capacity on its syndicated revolving credit facility, and a reasonable tax rate of 25-26% for modeling purposes, position it well for future growth. As K-Bro continues to focus on its Canadian and UK platforms, it remains optimistic about its growth prospects, driven by steady trends in healthcare and hospitality segments.

3. NewsRoom

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K-Bro Linen Inc (KBRLF) Q3 2025 Earnings Call Highlights: Record Revenue and Strategic ...

Nov -13

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K-Bro Linen Q3 Adjusted Earnings, Revenue Jump

Nov -12

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K-BRO REPORTS RECORD Q3 REVENUE, EBITDA AND ADJUSTED EBITDA

Nov -12

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K-BRO APPOINTS THE HONOURABLE RONA AMBROSE TO ITS BOARD OF DIRECTORS

Nov -06

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K-Bro Announces Release Date, Conference Call and Webcast for Q3 2025 Financial Results

Oct -25

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K-Bro Declares October 2025 Dividend

Oct -15

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Is K-Bro Linen Inc.'s (TSE:KBL) Recent Stock Performance Influenced By Its Financials In Any Way?

Oct -09

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K-Bro Linen to Benefit From Canada's Aging Population, Says Stifel Canada

Sep -19

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (5.85%)

6. Segments

Healthcare

Expected Growth: 5%

K-Bro Linen Inc.'s 5% growth in Healthcare is driven by increasing demand for linen services from hospitals and long-term care facilities, an aging population, and a growing need for infection prevention and control measures. Additionally, the company's focus on quality, customer service, and cost-effective solutions contributes to its growth in this segment.

Hospitality

Expected Growth: 7%

K-Bro Linen Inc.'s 7% growth in Hospitality is driven by increasing demand for linen and laundry services from hotels, restaurants, and resorts. This growth is fueled by rising tourism, expansion of existing hospitality businesses, and the need for outsourcing non-core services to improve operational efficiency.

7. Detailed Products

Healthcare Linen Services

K-Bro Linen Inc. provides laundry services to healthcare facilities, including hospitals, long-term care facilities, and medical clinics.

Hospitality Linen Services

K-Bro Linen Inc. offers laundry services to hotels, restaurants, and other hospitality businesses, providing clean linens, towels, and uniforms.

Food and Beverage Linen Services

K-Bro Linen Inc. provides laundry services to restaurants, cafes, and other food service establishments, including tablecloths, napkins, and uniforms.

Uniform Rental Services

K-Bro Linen Inc. offers uniform rental services to businesses, providing clean, pressed uniforms for employees.

Facility Services

K-Bro Linen Inc. provides facility services, including laundry, housekeeping, and maintenance services to healthcare and hospitality businesses.

8. K-Bro Linen Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for K-Bro Linen Inc. is medium because while there are some alternatives to linen supply services, they are not highly attractive to customers.

Bargaining Power Of Customers

The bargaining power of customers is low because K-Bro Linen Inc. has a diverse customer base and no single customer accounts for a significant portion of its revenue.

Bargaining Power Of Suppliers

The bargaining power of suppliers is medium because while K-Bro Linen Inc. relies on a few key suppliers for its linen products, it also has some flexibility to switch suppliers if needed.

Threat Of New Entrants

The threat of new entrants is low because entering the linen supply industry requires significant capital investment and regulatory compliance, making it difficult for new companies to enter the market.

Intensity Of Rivalry

The intensity of rivalry is high because the linen supply industry is highly competitive, with several established players competing for market share.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 32.05%
Debt Cost 6.62%
Equity Weight 67.95%
Equity Cost 9.45%
WACC 8.55%
Leverage 47.16%

11. Quality Control: K-Bro Linen Inc. passed 5 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Dexterra

A-Score: 6.9/10

Value: 5.9

Growth: 6.1

Quality: 5.6

Yield: 6.0

Momentum: 9.0

Volatility: 9.0

1-Year Total Return ->

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K-Bro Linen

A-Score: 6.1/10

Value: 5.4

Growth: 5.9

Quality: 5.1

Yield: 5.0

Momentum: 6.0

Volatility: 9.3

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Cass Information Systems

A-Score: 5.8/10

Value: 5.1

Growth: 4.7

Quality: 6.8

Yield: 6.0

Momentum: 3.5

Volatility: 8.7

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Calian

A-Score: 5.3/10

Value: 6.5

Growth: 5.8

Quality: 3.8

Yield: 4.0

Momentum: 4.5

Volatility: 7.0

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ARC Document Solutions

A-Score: 5.2/10

Value: 5.7

Growth: 3.2

Quality: 4.0

Yield: 7.0

Momentum: 5.0

Volatility: 6.0

1-Year Total Return ->

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Civeo

A-Score: 4.0/10

Value: 6.8

Growth: 3.2

Quality: 2.3

Yield: 3.0

Momentum: 3.0

Volatility: 5.7

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

35.25$

Current Price

35.25$

Potential

-0.00%

Expected Cash-Flows