Aimia is a company that has been covered both in my Blogdaleup(WordPress) and Workathon-Blogger (Google) blogs.And as many people know it used to own and administer the Aeroplan program that handled the loyalty and award program for Air Canada.But that has come and gone and Aimia is making a good job of transforming itself.Like in the picture above it will take a lot of work to see Aimia return to it’s old price levels.But right now,with the pandemic,it looks like Aimia got a pretty good deal for Aeroplan.However in late 2019 and early 2020 it appeared that the Aimia board abandonned it’s shareholders
New Board and New Activities
The Aeroplan award and loyalty program had been once valued at $2.5 billion;Aimia owned it completely.Air Canada wanted to end this long running contract unilaterally by June 2020.It offered $450 million for Aeroplan and the board accepted the offer.This blog encouraged Aimia board to break the contract citing duress.At that time two banks backing the program offered $500 million for Aimia to continue the program.This blog advised Aimia to take on partners and accept a deal with the banks.To be clear Aeroplan represented Aimia’s future.When the deal was finalised this blog called for the board and CEO to be replaced.At the time there was little controversy over the ill-begotten sale.But eventually law suits emerged and a new board and CEO was put in place.Now the Mittleman Brothers, a significant shareholder, controls the board and is the CEO.
With the loss of Aeroplan, Aimia was faced with a reduction and unstable source of revenues.This caused the Aimia board to decide to eliminate the dividend. Consequently the share price dropped to as low as $1.80 per share.This blog felt that accepting the deal with the banks and other partners (like Porter Airlines) could have saved the dividend or only reduced it.And it was the sudden drop in the share price that lead to lawsuits and a change in ownership.
The former Aimia owned or managed a number of Airmiles’programs including one in Mexico called PLM and a small stake in an Asian loyalty program. The Mittleman Brothers are an American investment holding company and a substantial shareholder.They had every right to sue Aimia.They did so successfully and replaced the board and CEO of Aimia.So the new Aimia is a merger of Aimia and Mittleman assets including a new 49% stake in a loyalty company called Kognitiv.And to top this off Aimia just received a $67 million payment from Air Canada related to the indemnification of Aeroplan obligations.
This blog feels some pride in Aimia remaking itself as well as the rebound in price from as low as $1.80 to the $3.50 level.If someone had not reacted to this blog’s call for a new board the stock may have stayed at the $1.00 to$1.50 level.Now that Aimia has shown staying power it is even possible that future contingencies will be paid from Air Canada.But this blog feels that Aimia has too many scattered investments and there should be some consolidation.One or two assets could be divested now and a return to loyalty programs such as their new asset Kognitiv Loyalty.This and the hope of a small dividend in 2021 could send AIM as high as $3.75-$3.95.
This website handles my new and exploratory topics.Since I have never discussed ETFs before;this is the best place to look at XRE- a real estate Reit ETF.a An ETF is made up of a number of companies-not just one.The ETF weights the average- higher for preferred companies and less for those not as preferable.A good reit must see the movement in real estate markets well before the average buyer or seller just like the man in the lighthouse above.In times of change some holdings will be sold and some bought to reflect changes in the marketplace.In other words the weighting of companies in the ETF changes.
Looking at XRE
XRE is not an average of real estate companies;it is a weighted average of reits.3 companies make up about 40% of XRE.They are CAPReit (15.45%),Riocan Reit(12.25%) and Allied Properties (12.02%).7 more reits comprise a further 37% as they have a lower individual weighting.In other words there are a lot of fruit and vegetables in the wheelbarrow but some take up more room than others.The yield on XRE is about 6.6% now and that is a weighted average of the companies in the ETF.In addition, XRE is cheaply priced with a P/E ratio around 10 times.
XRE is not one of the top 3 reit ETF performers in the last 3 months but it is considered to be a good performer over the next 2-3 year period.Chiefly because it is a low P/E ratio at 10 times and a quite healthy yield at 6.6%.Still it fell almost 40% over the last 3 months.But the 3 foundation companies which make up 40% of the ETF have good growth prospects – ,especially CAR.UN which makes up 15.5% of the value of the reit.
However,at this time all reits are suffering from the downdraft of the market in general.Although it’s 3 foundation companies-CAP Reit,Riocan and Allied Properties have performed well over the last 18 months they too have succumbed to market conditions. As a consequence the XRE price has dropped from $21 a share 3 months ago to a low of $12.Now it has moved up slightly to $14.25 and it’s P/E ratio is still a reasonable 10 times.
XRE will likely move with the market in general over the next two quarters.As it’s beta is only 1.15 which means that it moves in tandem with the market.And this blog believes that reits will outperform the market in general.It’s three main components,that is,CAP Reit,Riocan and Allied Properties will provide above average growth.And it’s yield at 6.6% is very attractive in this low interest rate environment.This blog looks for XRE to slowly move up to the $16-$18 area by yearend.This is still below it’s 52 week high of $21 per
On February 25 Aimia,a loyalty solutions company, released it’s fourth quarter results.There was no information given on annual results as of yet.Earnings per share (e.p.s) went from a loss of $1 after the loss of Aeroplan to a gain of $.20 this quarter.Partly explained because operating expenses were down almost 50%.Still adjusted EBITDA showed a $13 million loss.More importantly for the future direction of Aimia the release states that the reconstitution of the Board is effective today.That should mean that 4 board members will be replaced.Jeremy Rabe was thought to be one of the four but is still acting as CEO.He presided over the board when the terrible settlement for Aeroplan took place.It is a terrible settlement because 2 or 3 Canadian banks (chiefly the TD bank) were willing to pay the entire amount of the proceeds from the sale in order to keep using Aeroplan.This would have kept Aimia with possession of Aeroplan.Consequently he does not according to this blog have the dynamic makeup required to move Aimia to the $5 per share area that shareholders are expecting.And this blog would like to see him moved to a lower management level. It is possible that Jeremy Rabe has the detailed knowledge required to admininster Aimia’s programs but not to lead Aimia.
The main concern of investors is that e.p.s. went from a$1 loss to $.20 gain.However revenues were down 5% from Q1 in 2018.Consequently adjusted EBOITDA still showed a $13 million loss.On the other ahnd Aimia made a 50% reduction in expenses.They reduced office space and their total presence in several countries.Aimia really tightened up it’s operation.Employees,for example, were 750 at the beginning of the year and 520 last quarter and now only 450.
Jermey Rabe, the CEO, says that “AIMIA is placing a sharper focus on it’s core capabilities”.As a result it is substantially decoupling from Aeroplan.Consequently it has new consulting contracts with South Africa and U.S.A.And it has put more investment into the Air Miles Middle East program.
The Second Half
This blog foresaw a dismal 2020 after the loss of Aeroplan as discussed in my blog on Google-Blogdaleupsome.com on August 31,2019.That blog was entitled Living without Aeroplan.It called for legal action to restore some kind of equity in what was a semi-illegal action.But results from Q1 are a step in the right direction.
This blog sees little change in Q2.Likely e.p.s will be $.15 to $.25 in Q2.But shareholders should expect a slight deviation in company direction by the second half of 2020, especially if Jeremy Rabe is moved into a lower administrative position.This blog has said before and continues to say that Aimia needs to look at further legal action on Aeroplan because of the unusual situation.That aside Aimia still is on course to hit $.75 to $.90 e.p.s. for 2020.And with a normal P/E ratio this should send the stock price to $5 by summer. https://www.otpp.com/home
This is another of those technical matters best covered on my Blogdaleup website. The company examined here is Cargojet.”Cargojet is Canada’s leading provider of time sensitive premium overnight air cargo services.”It carries more than 8 million pounds of cargo weekly.It has been around for a few years but has garnered more attention recently.However the stock price has moved up steadily since 2016.It traded at $25 in early 2016 and at $50 in January 2018 and now trades at $100. It is getting more attention recently as it got a nice bump in the stock price in September,2019 when Amazon made a deal with Cargojet.
The Amazon Deal
Amazon and Cargojet seem like natural partners;online ordering combined with overnight on-time delivery.Apparently Amazon thought so also.So they offered to buy 10% of Cargojet and Amazon promised to ship 400 million pounds of cargo in return.This is roughly equal to one year’s shipments since Cargojet delivers 8 million pounds a week.This is a lot of new business and could double CJT revenues if delivered in the first year.In addition, if Cargojet meets the performance requirements of this deal there will be a further 200 million pounds.Revenues only increased by 16 to 24% in Q3 2019 but are sure to increase by more than this in Q4 and throughout 2020.The Amazon deal virtually guarantees that.
The Stock Price is on a Plateau
When the Amazon deal was announced (in September,2019) the stock price jumped to $105.50 but has fallen back in October and November to the $95– $101 area.On November 4 the Q3 results came out.Although total revenues showed moderate growth,recurring revenues showed a larger gain.Investors saw that adjusted EBITDA increased by almost 25%.And the CEO says that “as we enter the peak shipping season(Christmas),our team will be focused on continuing to meet our customers capacity requirements while delivering the best customer experience for this holiday season”.Q4 has traditionally been a good quarter for CJT.This blog believes that CJT stock price will have a good Christmas also.Look for CJT to be in the $108-$110 area by yearend.
On August 4, 2019 (3 months ago) this blog,(Blogdaleup) strongly suggested that the chairman,executive director and several members of the board should resign.Now a press release has shown that an irate shareholder called Charles Frischer has formed a challenge to the board and it has succeeded.Some accounts say that the board will be replaced right away while others say not until 2020.Either way this is a lame duck board and soon there will be almost a completely new board.It is not clear yet whether Charles Fischer will be on this board or not.The stock has reacted by moving up about 10% since the coup made on November 15.
There have also been several blogs on my Workathon-Blogger site suggesting that a shuffle of board members is due at Tucows.This website ,Blogdaleup, also has blogs on August4,2019and April28,2018 discussing the ineffectiveness of the Aimia board.Tucows was thought to be a software company or an amalgamation of small software companies but instead is just a registry for domain names and a small mobile internet company in southern USA.It is a company with few barriers to entry and may expect more competition from new entrants in the future without changes.I have made several suggestions to Laurel Hill ,a proxy collector company, to mount a challenge to the board here-especially their CEO called Elliott Noss.Noss has a very large salary for administering domain names.Like Aimia it’s share price has fallen recently.Tucows traded at a high of $120 per share and now is trading at about $71-$75 per share.
Reasons for the Aimia Coup
Aimia had about $2 billion invested in it’s main revenue driver called Aeroplan which was a travel and loyalty program with Air Canada.However about 18 months ago Air Canada told Aimia that they will be cancelling their contract in June 2020.Then they offered Aimia approximately $450 million with a few extras.Aimia had a few less favourable options but decided to take the Air Canada offer.This blog many times suggested that Aimia should sue Air Canada for unilaterally cancelling the contract for which Aimia had no performance issues.Once the sale was completed gradually the stock price drifted lower. Shareholders knew this was not a good deal.This blog suggested that a suit could still be made as Air Canada had negotiated with Aimia under duress conditions. as Aimia really had no other viable option.Furthermore no changes were made or contemplated with their settlement money. No major new investments nor loyalty programs were acquired.Shareholders started to panic and suddenly Charles Frischer emerged.
The Tucows’ Situation
Tucows is in a slightly better position.It has not really lost any major assets and it’s earnings are substantial.Yet it has invested in projects with low returns and easy to manage.Still Tucows has about $1.00 per share of earnings in 2018.Only Kinaxis, of all the Canadian software companies, has more earnings per share.Shopify ,for example, has no earnings.Most small software companies show only a small amount of earnings for the initial several years.But Tucows continues to hold it’s small mobile internet called Ting which has substantial management demands while it earns only pennies per share of earnings.And to manage this largely clerical function witrh little creative demands they pay their CEO and board members six digit salaries.
There are two major conclusions to be drawn.First the Aimia price has already recovered slightly but could improve further.The new board has to enter into mediation or commence a law suit against Air Canada. This need not be made public.And they need to restart negotiations on a fair value settlement for Aeroplan.
Tucows needs first to eliminate 2 to 4 members of it’s board and then to sell off some of it’s assets.It does not need to manage more domaine names nor buy more companies with domaine names.And it should sell off it’s mobile internet company called Ting;this company is capital intensive and earns little profit.In short,Tucows needs to become a true Canadian software company. https://www.otpp.com/
This is one of a series of blogs on the coming lack of supply by oil producers.This is especially true of marginal producers that have less accurate methods of measuring the size of the oil reservoir and may find they are in unproven rather than proven reserves.Also the big oil pools tend to be discovered first as they are easier to discover.So the big oil pools are usually old oil pools and are closer to having thick, viscous oil reservoirs today.
I am asking Chris to go to Waterloo and stay at the Waterloo Inn.Hopefully our head hunter has found a fairly recent graduate with online advertising experience.And Chris has his materials from Sir Wilfred Laurier Business School.He should be joined by Unbounce(2) and Sortables(2) and Scribble Live(2).All travel and accomodations will be paid for.We need a new organization with maybe one or two staff cuts and then a new stock listing on the TSX .Something with some fanfare.
The girls with Cindy will go to Cambridge to the Travellodge.That will be Jasmine, Claudia and Chloee.Cindy will make sure they don’t get fooled by Cambridge folklore.And she will make sure they get to the Waterloo Inn to help Chrtis and to find out about the junior technology companies which is the backbone of my business.Once again photocopying and faxing or typing where needed.The important thing is to find out how these guys do business and to help Chris.
Cindy can also show the girls her houses and my houses (3).And let them know what they are worth approximately.And then bring them back.Next time Claudia will be replaced. https://twitter.com/home
On September 19 AGF announced that it sold it’s British operation called Smith and Williamson for total proceeds of C$320 million and will retain a 2.3% interest in the new company.The $320 million compares to the book value of $138 million.And AGF is expected to receive a special cash distribution of $33 million prior to closing in early 2020.This blog sees this money as being able to help with it’s coming makeover.
AGF’s Canadian Business
AGF’s total assets under management as well as their mutual fund business has been declining (2-3%) in 2019.Yet at the same time they are starting new funds and ETFs that should bring in new funds in 2020.So AGF has to reorganize it’s funds and combine or even divest some of it’s funds that have a low return on equity. Yet overall revenue ( not counting the sale of S and W) is up by 1 to 2% and net income is up 80% from 2016.
Comparison to Fiera Capital
An earlier blog of mine on Google Blogger called Workathon compared the prospects of Fiera Capital,Guardian Capital and AGF Management.At the time, my blog picked AGF as the likely winner in a race upwards in the stock price.At the time Fiera was trading in the $12 range and AGF was in the $8 range.Since then AGF has traded as low as $5.25 and now up to the $5.75 range.My Workathon blog dated 22/07/2017 stated PublishedMenu=alhttps://www.blogger.com/blogger.g?7504908;onPublishedMenu=allposts;onClosedMenu=;po
stated that Fiera was increasing it’s AUM but also it’s number of shares in order to acquire other companies.Whereas AGF was expanding organicly.But since 2017 AGF has been helped by it’s British subsidiary. It was getting increasingly larger cash distributions from Smith and Williamson.Now with the sale (of S and W) there will be an immediate distribution of $33 million followed by a lump sum after closing.Furthermore after closing AGF will still own a 2.3% interest.On the other hand, this blog does not see Fiera Capital moving back to $12 a share soon.
My blog on Workathon dated 16/04/2019 stated that net income for 2019 will likely be about $450 to $460 million and earnings per share between $.70 and $.80 per share.This blog forecasted that this financial performance should produce a stock price of $6.00 to $6.50.It is also the belief of this blog that AGF will take the $33 million cash distribution and use it to cull some of it’s unsuccessful funds and combine others together.Mutual funds are less attractive to customers now and some could be divested.Whereas ETF s are now more attractive to many customers.This blog sees a very average year for 2019 but changes such as it’s InstarAGFAssetManagement and AGFiQ funds will start to increase returns in 2020.And there will also be the proceeds of Smith and Williamson in early 2020.This will allow AGF to start to climb the mountain as in the picture above. https://www.omers.com/