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Stonegate Capital Partners Updates Coverage On Black Diamond Group Limited (TSX:BDI)

Key Takeaways
  • Improving profitability through scale
  • Robust market dynamics in specialty rental
  • Value added products & services

DALLAS, TX -- August 30, 2022 -- Black Diamond Group Limited (TSX:BDI): Stonegate Capital Partners updates coverage on Black Diamond Group Limited (TSX:BDI). The full report can be accessed by clicking on the following link:


Black Diamond Group Limited is a specialty rental company that rents and sells modular workspace and remote workforce accommodations solutions from 27 strategic locations across Canada, the United States, and Australia. The Company operates in two segments: Modular Space Solutions, which provides office units, lavatories, storage units, multi-unit office complexes, and classroom facilities and Workforce Solutions, which provides temporary and intermediate-stay workforce housing and lodging equipment. The Company provides services to a wide array of industries including construction, mining, power, oil, natural gas, engineering, military, government, and education. The Company was founded in 2003 and is headquartered in Calgary, Alberta.


  • Improving profitability through scale – BDI has continued to expand its Modular Space Solutions (MSS) rental fleet through investment into new units and acquisitions of existing fleets. The Company is targeting net fleet growth in MSS of approximately 10% per year and is on track to double the rental fleet from 2019 to 2023.
  • Robust market dynamics in specialty rental – In the current inflationary environment, the asset rental space can be an attractive hedge for investors. The Company has seen strong pricing traction in its MSS segment with average rental rates up 9% y/y on a constant currency basis. Further, utilization in the MSS business remains at or near all-time highs and is a function of strong markets and execution across the Company’s diversified rental platform.
  • Significant operating leverage – The Company has a significant amount of underutilized assets in the workforce segment and has shown the ability to mobilize and deploy assets into mining and disaster recovery projects over the last several quarters. Utilization in Workforce Solutions (WFS) has improved to 50% in Q2F22 from 43% in the comparative year.
  • Value added products & services – The Company is continuing to increase rental revenue and margins by offering customers additional onsite services, and auxiliary rental options. Value Added Products & Services (VAPS) revenue has continued to grow steadily. The VAPS % of rental revenue has seen a modest decline owing to a sizable acquisition (Vanguard) in late 2020 which did not provide much in the way of VAPS. This, however, provides an opportunity to drive additional VAPS revenue through the acquired Vanguard assets.
  • LodgeLink market traction – BDI has developed an online digital marketplace and workflow software for companies that require accommodation solutions for work crews in the U.S. and Canada. The Company has been rapidly scaling the platform and most recently reported 642 unique customers and approximately 7,300 properties which represented approximately 697,000 rooms of capacity. In Q2F22, LodgeLink room bookings grew 58% y/y to 68,412.
  • Disciplined capital expenditure approach– BDI is focused on growing its current fleet and services using cash from current operations and the sale of underutilized assets. This strategy should help maximize efficiency and increase cash flow over time. The Company reported free cashflow before discretionary growth capex, of $14.5M for Q2
  • Geographic & customer diversification – The Company currently conducts business throughout 27 strategic locations in Canada, United States and Australia with plans to continue expanding through establishment of additional branches and growth of existing fleets. The Company’s revenue mix is diverse with the largest concentration coming from the construction sector at roughly 26% in Q222, followed by power & energy infrastructure at roughly 20%. The MSS segment alone, rents to over 2,000 different customers.
  • Valuation - Using a sum-of-the parts multiple analysis, we arrive at a valuation a range of $7.00 to $10.75, with a mid-point of $9.00. Additional details are on page 7.

About Stonegate Capital Partners
Stonegate Capital Partners is a Dallas-based corporate advisory firm dedicated to serving the specialized needs of small-cap public companies. Since our inception, our mission has been to find innovative, undervalued public companies for our network of leading institutional investors who seek high-quality investment opportunities.

Key Takeaways
  • Improving profitability through scale
  • Robust market dynamics in specialty rental
  • Value added products & services
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Marco Rodriguez
Director of Research Stonegate Capital Markets
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Stonegate Capital Partners
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