RE: Scotia They reduced their target from $32.50 to $31.50, to be fair you left that point out of your post.
Exchange Income Corporation (EIF
-
T C$26.24)
Mark Neville, CFA
-
(514) 350
-
7756
(Scotia Capital Inc.
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Canada)
Navigating Short
-
Term Turbulence
Event
Pertinent Data
New
Old
Rating:
--
SO
Risk:
--
High
Target:
1
-
Yr
$31.50
$32.50
EBITDA13E
$119
$127
EBITDA14E
--
$141
New Valuation:
--
Old Valuation:
7.0x EV/EBITDA our 2014E
Key Risks to Target:
Integration Risk, Access to Capital
Markets
Full Story
ScotiaView Analyst Link
Table of Contents
¦
Exchange reported Q1/13 EBITDA of $17.6 million vs. consensus of $19.0
million and our
estimate of $20.7 million.
Implications
¦
We have made modest changes to our 2013E to primarily reflect a weaker aviation end
-
market due to competitive pressures in the East and a weaker outlook for mining activity.
We have lowered our
target to $31.50/share, which implies a 5.3% dividend and 10.9% FCF
yield.
¦
We estimate the company could raise its dividend 43% to $2.41/share in 2014 (assuming a
70% payout on our 2014E). Furthermore, we estimate a $100 million acquisition would be
7.0% a
ccretive to our 2014E FCF, providing additional upside to the dividend.
¦
As at April 30, the company had $229 million of availability on its credit facility. At the end
of Q3/13 (peak working capital requirement), we estimate the company will have $223
mill
ion of availability. We estimate a $100 million acquisition (at 5.0x EV/EBITDA) would
provide upside of $1.50/share to our target price. Management indicated that the pipeline
for tuck
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ins and larger
-
sized deals remains active.
Recommendation
¦
We see upsi
de potential in the share price and dividend, and remain buyers