Exchange Income (EIF.TO)

There is an aviation and manufacturing division within this company. As a conglomerate it usually trades at a discount. There was a short selling investor who had issues with some of their acquisitions in the past. Some lower margin leasing activity in the aviation division may also be creating some uncertainty with investors.

This company grows by acquisition with an aviation business in Northern Canada and in the manufacturing sector. A high yield with only a 34% payout ratio and an ROE of 14.9%. Yield 6.6%. (Analysts’ price target is $45.20 )

As a proud Manitoban, he likes this company. It has mostly government contracted aviation deals. It is trading at a discount to its historical multiple, but the problem is they keep spending their money. They need a couple years to consolidate capital. They could face future competition in their Northern Canadian market space. The yield is about 6%. It is not a bad buy here at the current price weakness.

Regional planes and aftermarket parts distribution. He likes the business. It’s been under pressure from a Short seller making comments about using debt to pay the dividend. He is not convinced. They’ve been fairly active doing acquisitions, and he looks at the debt as being for acquisitions. Trading at a reasonable valuation at about 16X, and pays a great dividend of almost 6%. He is buying for new clients.

(Market Call Minute.) There are Short reports out there, and he is trying to get his head around as to whether the Shorts have nailed this or not. There are some concerning signals. He would hold off on this.

This has gotten beaten up over the last 6-12 months. A short seller report came out questioning what they need to spend on some of the CapX on their airlines, as well as if dividends are sustainable. The company came out with good earnings which solidified their dividends. The stock rebounded up to around $34-$35, but has now come back down to around the $30 mark for no rhyme or reason. (Analysts’ price target is $42.)

A kind of illiquid stock that moves around a lot. There is a Short Seller piece out there that says they are not going to have enough free cash to meet their dividend. CapX has been elevated. Thinks the Short Sellers are wrong and that they are going to grow their earnings by 12% over the next couple of years compounded annually. He models a payout ratio of 96% for 2017 next year. Thinks you will get a good combination of dividend and upside from here. Dividend yield of 6%+.

It is still a buy. It is a really good company back to 2005. They have almost always had 10% or more return on capital.

This had a Short report issued on it. The Short thesis is not new at all, as it has been on and off for the last few years. Primarily it has to do with the sustainability of dividends. Doesn’t think the Short thesis is solid. The company’s argument that a lot of capital expenditure has been for growth, rather than maintaining its operations, makes a lot of sense. The real question is, are you comfortable with the underlying business mix being essentially a specialty regional airline with some older planes, but make them last by completely overhauling them. There is also the acquisition of Region 1 taking older airplanes and selling them for parts. You have to be comfortable with the cyclicality and how well they manage it. If you are, this is a bargain.

Missed on Q1 operational challenges in aerospace. They increased costs on a fleet overhaul, as well as having some bad weather. Even without some of these challenges, they would have missed by 5%. Management is still modelling 12% EPS. The stock is pretty illiquid. Trading below its five-year average.

(A Top Pick March 14/17. Up 9%.) *Short* A small manufacturer and aviation company. The aviation side of the business is far more important to them. They operate several regional airlines that service northern Canada, as well as the east coast. They also have an aircraft leasing business, Regional1 in the US. His issue is very much around their allocation of capital and that they spend their cash flow in a very dramatic way. CapX is greater than their operational cash flow, plus they have debt, plus they pay a dividend. Not a sustainable way to run a business.

*Short*. Recently, the Northwest Company (NWC-T) who owns and distributes goods to northern communities, used to be a large customer, but are now a competitor having bought North Star Airline and planning on expanding routes, in direct competition with this company and some of their subsidiaries BearSkin and Perimeter. This still has capital problems and should not be paying dividends. Dividend yield of 6.2%. (Analysts’ price target is $47.)

Believes it has a pretty handsome yield. He used to own it years ago. It is a proper business. He thinks it has a good long term yield and should be picked away at on weakness.

He models a 12% EBITDA growth over the next couple of years. Trades at a valuation that is lower than its five-year average. Debt to EBITDA continues to improve at around 2.2. The 5.5% dividend yield looks pretty safe. Missed on Q4 due to weather and equipment issues. You could be picking away at this time.

Shareholders have had really good returns in a short period of time, where there has been substantial growth, so things have to take a little bit of a breather at some point. This is an acquisition oriented company, so they are going to have higher debt levels at certain points. A solid company. Pays a nice solid dividend in the 5%-5.5% area. If you can buy this on a little bit of a dip, there are opportunities here.