Exchange Income (EIF.TO)

This company has 2 segments. Airlines/aerospace and manufacturing. Likes this and thinks management has done an excellent job. They really navigated around the West Tower acquisition and divestiture. Thinks it will continue to do what they have been doing. They buy private businesses using marker capital at higher multiples. They have synergies between their businesses.

This is a niche player, not only in automotive, but also in aviation. It is a growth by acquisition story and he sees a lot of synergies in this area. Dividend yield of 7.37% which is not only sustainable, but capable of being grown.

Growth by acquisition. He likes this and thinks it is viable. Has a nice dividend. He models 68% 2016 estimated payout ratio. Debt levels are okay. Debt to EBITDA is 2.8X. He models 18% cash flow per share growth over the next couple of years. It is still trading below its five-year average. A higher risk name. Yield of 7.8%. His target is $30.

A higher risk stock and somewhat illiquid. His company has a $28 target on it. He forecasts their 2015 payout ratio at 60%, so the dividend looks good. Trading below its five-year average EBITDA of 7%. They just de-levered their balance sheet by selling the West Tower. Bought an aerospace company which looks like it is going to be pretty accretive and a strategic fit.

They have gone debt free and basically said they will never make the mistake again of having one company too dominant in their portfolio. The dividend is massively safer than it was two weeks ago. It was getting rather risky then, but they got out of it very nicely. Hold for the income.

He has been Short this name most of this year and just covered his position in August. They are a holding company. Have 2 primary businesses, a regional airline business and maintenance and construction of cell phone towers in the US. AT&T is a customer. Just announced they are going to sell this US division.

Stock is not doing very well. This started off as a sort of conglomeration of various businesses. Started off in the airline space, basically ambulances and government contracts moving people from the north down to Winnipeg for medical care. That is a good business because the government is your customer. Then they ventured off into things such as cell phone towers, and this is what is causing a lot of concern right now. He would be very careful about this. It has a feeling that there is something wrong.

Primarily held by retail investors. One of his largest short positions. 60% of revenues come from servicing AT&T towers. Another business is related to airlines. He is not excited about either one. Contacts are coming up for renewal in September and they are not profitable. He calls this an absolute short because he thinks it will go down regardless of whether the market goes up or down. Does not think the dividend is safe.

He likes this name. Its 2013 payout ratio is very high, but on his 2014 assumed numbers, from them turning around their West Tower asset. If they can achieve 4.5% margins in 2014 on that asset and 7% in 2015, he models a 55% 2015 payout ratio. If that’s the case, the 9.7% dividend is fine. He also sees it trading at a very fair value of 8.7X 2015 right now.

(Market Call Minute.) He would like to see how things shape up with AT&T. Their West Tower division has been having some troubles.

Held in the past. Exited when they had issues around the cell tower company and that issue has been overhanging them for some time. Dividend is safe. As soon as numbers improve he would be in.

He no longer covers this. Something like a Mosaic Capital (M-X) in that they buy businesses and leave management in place and just get the dividend and do capital allocation. Started off in the airline space doing ambulatory airlines, basically up north doing evacuations. A good business because government pays you, pays well and pays on time. They took the cash and made other acquisitions and some of them have not worked out that well. That’s the risk with these things. This one is a “wait and see” for him.

Likes the business. Well run. Nice to be that diversified. There is more opportunity. Likes management.