Positives on the turnaround

Cost-cutting and cold-closing continue to show tangible progress. Accommodation gross profit margin improved again, reaching 27.38%, up from 25.71% in the previous quarter and 17.87% a year earlier.

The share buyback program is moving steadily forward. With 69% of the authorization already completed, the company remains on track to reduce its share count to around 10.5 million. Once completed, buybacks should slow and remain opportunistic, funded only through internally generated cash rather than additional leverage.

Free cash flow for the quarter was $8 million, about 3% of market cap generated in just one quarter.

Australia continues to perform strongly. Utilization is at record levels, food services are improving, and management reaffirmed its goal of achieving A$500 million in integrated services revenue by 2027.

Additionally, there is active bidding for roughly 3,000 mobile rooms tied to U.S. or Canadian infrastructure projects, which could provide incremental upside if awarded.

Negatives on the turnaround

Management signaled a potential softening in Australian utilization, suggesting that the exceptionally high rates achieved recently may moderate slightly going forward.

Canadian utilization remains very weak—24% headline, or about 27% normalized if cold-closed lodges are excluded. Utilization has stagnated at these low levels, underscoring the need for further cold-closing or redeployment of assets into infrastructure-related projects.

Because free cash flow has been modest while the buyback program continues, debt has risen to $187 million, equivalent to 2.2x net debt to EBITDA. While EBITDA remains somewhat depressed, this level of leverage is not alarming. The company’s weighted average interest rate is about 6%, and its term loan matures in August 2028, providing a long runway.

Covenants are comfortably met: interest expense is roughly $11 million, EBITDA about $80 million, giving a 7x interest coverage ratio compared to the 3x covenant minimum. The maximum leverage covenant is 3.5x, so there is ample cushion.

Management reiterated plans to expand beyond the natural-resources sector, although competition in those adjacent markets will make that transition challenging.

Stress Testing and Revised Valuation

Management guided for $20–25 million in capital expenditures, mostly maintenance. They also noted that maintenance capex could trend lower because of ongoing Wi-Fi upgrades across the network.

Super-Stress Scenario

The Canadian business is valued at zero, assuming current utilization continues to drag on overall performance.

In this case, the Australian segment would generate roughly $70 million in EBITDA. After allocating half of corporate costs, subtracting $11 million of interest and $15 million of capex, free cash flow for the Australian business would be around $31 million.

With net debt of $187 million, that implies 2.6x net debt to EBITDA and 6x net debt to FCF—an uncomfortable but still manageable position.

Applying a 4x EV/EBITDA multiple yields an enterprise value of $280 million. After subtracting $187 million of debt, the implied equity value is approximately $93 million.

This scenario would represent a severe downside case, assuming no recovery in Canada and a valuation de-rating. It would require a sustained collapse in utilization and market sentiment.

Bad / Base Case

Canada breaks even through cost-cutting, essentially ceasing to be a drag on results but not contributing meaningfully to earnings.

Australia stagnates with no further growth. Under this setup, EBITDA would be around $90 million, with interest expense of $11 million and capex of $15 million, resulting in roughly $50 million of free cash flow.

The Canadian assets could retain some residual value in a sale, estimated at book value minus allocated debt (198 minus 139 = $59 million).

Australia would carry $49 million of debt. At a 6x EV/EBITDA multiple, the Australian business would be valued at an enterprise value of $540 million. Subtracting $49 million of debt results in $491 million of equity value. Adding the $59 million residual value from Canada yields a sum-of-parts valuation of about $550 million.

This is roughly double the current market cap and represents a realistic base case assuming stable Australian operations and continued discipline on cost control.

Bull Case

Canada recovers modestly, reaching around 40% utilization—still below historical norms.

Australia remains steady, showing no additional growth.

The company successfully deploys about 2,000 mobile rooms at 50% utilization and Canadian tariffs near $90 per night, generating roughly $30 million of incremental normalized revenue during construction years, similar to the Kitimat LNG cycle.

Under these assumptions, consolidated EBITDA would reach about $115 million. After $11 million in interest and $15 million in capex, free cash flow would be approximately $89 million.

Applying a 7x EV/EBITDA multiple for a derisked, cash-generative company implies an enterprise value of $805 million. Subtracting $187 million of debt leaves an equity value of about $618 million—around 2.3x the current market cap.

At these levels, the company would be trading near 7x FCF, a reasonable multiple for a stable, fully normalized operator.

Assumptions

• No growth is assumed for the Australian business, offsetting the potential for near-term softening.

• Expectations for Canada remain very low, with recovery optionality only considered in the bull case.

• After completing the buyback, the company stops repurchasing shares and focuses purely on organic recovery.

• No net debt growth is assumed, as the final $20 million of buybacks should be funded by the typically strong fourth-quarter free cash flow, supported by the collection of receivables.

Gonçalo