It’s been quite some time (four years) since I’ve written about Aimia (TSX: AIM).
The corporation is much ‘cleaner’ than it was when they were operating Aeroplan and especially now that they’ve sold their last loyalty program (PLM) they are sitting on a bunch of cash and assets. The PLM sale netted about $537 million, and by virtue of significant operating and capital losses in the past, the tax hit on this transaction will be relatively low. They still have a tax shield going forward and one of their stated intentions is to use their newly found half-billion dollars for investments to chip away at their tax shield.
From the June 30, 2022 balance sheet, they have a bunch of investments in income-losing entities. It does not inspire much confidence about future speculations.
Writing off the entirety of their investment portfolio, this leaves them with about $550 million to play with on 92 million shares outstanding, or about $6/share. There is no material liabilities or debt on the sheets. However, they do have $236 million in perpetual preferred shares outstanding which sucks out nearly $13 million/year out of the company, plus an even nastier Part VI.1 tax for another $5.1 million (hint to Aimia management – you perhaps might wish to NCIB the preferred shares). The rate resets are due in March 2024 and 2025, which would be at rates significantly higher than what they are paying now.
We know through public filings that they bought back 7.13 million common shares for $31.45 million in July and August. In a few days we will know about their September buybacks. The ending balance for August would be 85 million shares outstanding and approximately $510 million cash on the balance sheet, minus whatever else they threw money at in the interim.
Practically speaking, Aimia is trading at a price that is close to its cash balance, and assuming the remainder of its investment portfolio is worthless.
You would think that they should be able to convert half a billion dollars into something that earns a positive return. The Divestor Oil and Gas Index would be one avenue.
I tend to shy away from these “sum of the parts” entities because the incentives are generally misaligned for minority shareholders to make a proper return. Aberdeen International (TSX: AAB) was a poster child for this.
Aimia is controlled by Mittleman Investment Management, although they do not own a dominating stake in the company (approximately 10 million shares held between the company and the two brothers). Since Aimia does not have a common stock dividend, returns would be through capital appreciation. This typically would be driven by a share buyback, but as clearly evidenced by July and August’s trading action, the market has been more than happy to part ways with its shares at an average of $4.41.
The preferred shares are also not trading at a level that I would consider sufficient compensation (roughly 7% current yields and illiquid) given the overall situation.
Given the stress we are seeing in the market, even if there was a dump of liquidity on Aimia, I would find it probable that there would be some other part of the market that has a viable operating entity to be trading at equally or better levels at such a time. The fixed income component of it, however, I will continue keeping on eye on.
I am a long suffering AIM shareholder (common and prefs) agree with your thoughts about dumping common and keeping the prefs. Should have sold a year ago as Mittlemans seem to be good at rewarding themselves over shareholders