Kontrol Technologies: Canada-Based Smart Building Technology Play Trading at Discount to Net Cash
While share repurchases have yet to help bridge KNRLF's valuation gap, there's something else that could, unlocking significant underlying value.
Canada-based Kontrol Technologies Corporation, which in its home country trades on the CBOE Canada exchange under the ticker symbol KNR, and in the U.S. on the OTCQB under the KNRLF ticker symbol, is a nanocap-sized name in the smart building technology space.
Following a pair of asset sales last year, the company has built up a significant cash position. Some of this war chest has been invested in Bitcoin-related assets. However, unlike my recent article on Winland Holdings, crypto is not a significant element of the overall KNRLF stock story.
Rather, it’s the stock’s current discount to the company’s net cash position that makes this stock most appealing at current prices. So far, efforts to bridge this gap, not to mention the full gap between Kontrol’s full underlying value and its trading price, have not been effective.
However, besides perhaps macro factors complicating the situation right now, there may be something else in the pipeline that could serve as a catalyst to bring KNRLF stock to a price more reflective of the value of its operating business and other assets.
Kontrol Technologies: Background
Based outside Toronto, in Vaughan, Ontario, Kontrol Technologies operates through two operating subsidiaries: Kontrol Buildings and Efficiency Engineering.
Kontrol Buildings is a provider of both commercial/industrial HVAC retrofitting services, as well as other services such as remote monitoring, that enable property owners to maximize energy and operating cost efficiency.
Efficiency Engineering is a provider of net zero emission engineer and design services in Canada. Clients include several Canadian cities, regional governmental agencies, as well as well-known global companies like Honeywell.
Prior to 2024, Kontrol also owned two other subsidiaries: ORTECH Consulting and CEM Specialties. ORTECH is a air quality compliance consulting company, while CEM Specialities is in the emissions monitoring space.
These were the two aforementioned divested assets that have resulted in KNRLF’s large cash position. In January 2024, Kontrol completed its sale of ORTECH, receiving $6.1 million CAD ($4.4 million USD) in cash proceeds. In June 2024, Kontrol announced and completed the sale of CEM Specialities, receiving $17.3 million CAD, or $12.45 million USD, in proceeds.
With this influx of divestiture cash, Kontrol was able to pay down the vast majority of the company’s outstanding debt. KNRLF, perhaps in an effort to mimic larger, more high-profile companies that have dabbled in adding crypto to the corporate treasury, also started investing this excess capital into Bitcoin, through the purchase of iShares Bitcoin Trust ETF (IBIT) shares and call options.
In addition to adding crypto exposure to the balance sheet, KNRLF also put some of this cash to work via share repurchases. As discussed in an April 2025 press release, the company has bought back a total of 2.58 million common shares, or around 4.47% of its outstanding share count, through a Normal Course Issuer bid.
Unfortunately, despite these efforts to put divestiture proceeds to work, neither of these moves has had a positive impact on the price of KNR stock/KNRLF stock. In fact, over the past twelve months, Kontrol’s Canada-listed shares have fallen by over 40.7%, while its OTC-listed shares have fallen by nearly 45.4%.
Recent Developments
Several factors may explain KNR/KNRLF’s poor price performance over the past twelve months, particularly since the start of 2025. Concerns over changes in U.S. tariff policy, for one. The company’s own recent fiscal results may also be giving investors pause.
For the full year 2024, Kontrol reported net income of around $12.2 million CAD ($8.8 million USD, but that figure is inclusive of $13.3 million CAD ($9.6 million USD) in realized gains from the asset sales. Adjusted EBITDA for the full 12 month period came in at negative $525,458 CAD (around $380,000 USD). For the quarter ending Dec. 31, 2024, adjusted EBITDA came in at negative $290,144 CAD (around $210,000 USD).
Alongside macro developments and the latest fiscal results, investors may also be impatient about Kontrol’s next move with the rest of the divestiture proceeds. The divestitures were done largely in order for the company to pivot more towards the smart building space, but thus far, Kontrol has yet to make any new acquisitions in this area.
Nevertheless, whatever the reason behind KNR/KNRLF’s recent poor price performance, this sharp decline works to your advantage, if you’re just entering a position today. At current prices, shares trade at a fraction of underlying value.
KNR Stock/KNRLF Stock Valuation
Based on the financial data listed above, you may at first think that Kontrol is an unprofitable business: that’s not exactly the case. Last year’s negative EBITDA was primarily the result of one-time items like tax recovery. Net of this figure, full-year adjusted EBITDA for Kontrol was around breakeven.
For Q4 2024, if we remove both the tax recovery charge for this period (around $609,052 CAD, or around $440,000 USD), as well as $33,808 CAD (around $25,000 USD) in interest income, we get adjusted EBITDA of around $285,000 CAD (or around $205,000 USD).
Profitability during most of 2024 was also depressed due to other temporary items, such as professional fees related to the asset sales. Hence, adjusted EBITDA for Q4 2024 may be better reflective of operating performance going forward. On an annualized basis, this gives us adjusted EBITDA of around $1.14 million CAD (or around $820,000 USD).
So, what’s an appropriate EBITDA multiple for Kontrol’s operating businesses? At first glance, I would say that this is the sort of business worthy of a mid-to-high single digit EBITDA multiple. It’s difficult to find highly-relevant publicly-traded comps for Kontrol, but we can look to the EBITDA multiple of Kontrol’s 2024 divestitures as a reference to value the remaining subsidiaries.
According to a research note from Atrium Research analyst Nicholas Cortellucci, CEM Specialties was sold at an 8x EBITDA multiple. That may sound like a rich multiple for the rest of Kontrol, but considering that a strategic buyer would likely be able to wring out cost and growth synergies, an 8x multiple may be appropriate here.
With this, we have a gross valuation of around $9.1 million CAD ($6.5 million) for the operating business. Next, Kontrol’s non-operating assets. Per Kontrol’s latest financial statements, the company as of Dec. 31, 2024 had $2.1 million CAD (around $1.5 million) in cash, and a total of $10.6 million CAD (around $7.6 million USD) in marketable securities. Most of this is invested in certificates of deposit and other fixed income investments, but around $3.6 million CAD ($2.6 million USD) represents Kontrol’s position in IBIT.
Although IBIT has of course fluctuated in price since the start of 2025, right now it’s around where IBIT traded at on Dec. 31. Hence, it may be appropriate to assume this $10.6 million CAD/$7.6 million USD figure is still relevant.
Adding up the cash and marketable securities, we get an additional $12.7 million CAD, or around $9.1 million USD. Adding this to the $9.1 million CAD/$6.5 million USD figure for the operating business, we get a total gross value of $21.8 million CAD/$15.7 million USD valuation for the entire company.
Subtracting near-term and long-term lease liabilities totaling $380,000 CAD ($274,000 USD), as well as non-current liabilities of $355,000 CAD (around $256,000 USD), we get a net valuation of around $21 million CAD/$15.1 million.
Based on a 55.16 million share count, this equates to a valuation of 0.38 CAD per share for the CBOE Canada-listed KNR (trading at 0.16 CAD today), and around 27 cents per share for U.S.-listed KNRLF (trading for around 11 cents per share today).
In other words, potential upside for either KNR and KNRLF could be in the 140% range, give or take a few percentage points.
What May Help Spark a Rebound for KNR/KNRLF
Share repurchases and Bitcoin investments may have had zero impact on juicing up the price of KNR/KNRLF stock, but as mentioned earlier, there is something that could help spark a rebound for shares: M&A related news, with Kontrol either as buyer or seller.
If Kontrol were to announce plans to make a new bolt-on acquisition with its current war chest, investors could react favorably to the development, especially if the announcement involves an acquisition that will be immediately accretive/provide eventual major upside for existing shareholders.
In addition, if the company were to find a buyer, one willing to value the business at its underlying value, this too would likely lead to material gains for shares. That said, while M&A could serve as a substantial catalyst, it’s not as if buying KNR/KNRLF today is merely a binary bet that this company gets acquired/makes a big acquisition in the near future.
Other possible catalysts could potentially spark a rebound for shares as well. As tariff tensions have weighed on KNRLF, an easing of these tensions could lead to an outsized move higher for the stock.
Kontrol has already made efforts to assuage investor/customer concerns about U.S./Canadian tariffs, citing factors like its sourcing approach. In the quarters ahead, if it proves true that these factors are helping Kontrol mitigate/eliminate the impact of tariffs on financial performance, this could possibly spark a relief rally for shares as well.
Speaking of which, Kontrol’s fiscal results may be set to improve in Q1 2025 and beyond, given the one-time nature of the above-mentioned tax charge, plus the prospect of decreased professional services expenditures following the 2024 divestitures.
Other Risks/Uncertainties to Consider
Beyond the potential for tariffs, or related factors like a slowdown in capital spending, to negatively impact fiscal performance during 2025, there is an additional risk that could lead to lower prices for Kontrol.
While not included in the valuation analysis above, there are two additional liabilities on Kontrol’s balance sheet, related to two of Kontrol’s past acquisitions. First, there is $582,500 CAD (around $420,000 USD) in vendor holdback payable, related to Kontrol’s acquisition of CEM Specialities in the 2010s.
Second, there is $3.5 million CAD ($2.5 million USD) in vendor takeback payable, related to Kontrol’s 2021 acquisiton of Global HVAC & Automation. Memories of this ill-fated acquisition, which ended with Kontrol voluntarily assigning Global into bankruptcy, divesting of the business in the process, may also explain investor hesitance regarding this stock.
But while for IFRS purposes, these are still considered liabilities, Kontrol takes the position that it is under no obligation to pay back these amounts. The dispute over both amounts remains in litigation.
Although Kontrol’s current stance suggests high confidence that the company will prevail in the courts, and will ultimately be able to remove these liabilities from its balance sheet, unfavorable rulings in both cases would reduce potential upside, but not in a way where it eliminates its completely.
In a scenario where Kontrol is on the hook to pay both amounts, this would reduce my upside price target for KNR from 0.38 CAD to around 0.31 CAD. For KNRLF, this would reduce my target from 27 cents to around 22 cents per share.
Bottom Line on Kontrol Technologies Corporation
If you’re on the prowl for undervalued nanocap stocks, especially those that could recover well if current macro headwinds ease, KNR/KNRLF is a name to include on your watchlist.
The company’s large cash position provides a margin of safety, while the prospect of steadier results in the quarters ahead, as well as possible M&A developments, provide a path to much higher prices.
Although the outstanding vendor takeback amounts could continue to weigh over the company, any sort of announced resolution of this issue stands to be yet another catalyst for shares.
As KNR stock and KNRLF stock remain near 10-year lows, consider either one worthy of a speculative buy at current prices.
DISCLOSURE: As of Publication, The author (Thomas Niel) held a position in KNRLF.
DISCLAIMER: I wrote this article myself, and it expresses my own opinions. I am not receiving compensation from Kontrol Technologies Corporation or any other entity for writing this article. I have no business relationship with Kontrol Technologies Corporation, or any other company referenced.This article is for informational purposes only, and should not be construed as investment advice. Please consult your financial advisor before making any investment decision. Please be aware of the risks associated with trading KNR stock and/or KNRLF stock. Do your own due diligence, and caveat emptor.