RE:ScotiaLatest Research (9 November 2017) Exchange Income Corporation is an acquisition-oriented company with operating subsidiaries in the aviation and industrial manufacturing end-markets.
OUR TAKE: EIF's Q3 results exceeded our estimates and consensus, with EBITDA coming in at $72 million vs. consensus of $67 million and our $68 million. Also, as expected capex, both maintenance and growth, declined significantly in the Q leading to improved cash generation. Guidance from management suggests a similar level of maintenance capital in 2018 (as compared to 2017), with growth capex expected to decline (fairly materially, in our opinion), absent any significant investment opportunities. We continue to expect the company to generate sufficient OCF (before investment in working capital) to fund maintenance capital and its dividend, while using external sources of capital to help fund growth (i.e., investments in working capital and growth capex) - see here. The company also sounded fairly optimistic on its M&A pipeline, notably in Canada, and, in our opinion, also seemed to indicate it was getting closer to another dividend increase. Following the Q, our 2018/2019 estimates are little-changed. Our one-year target remains $42/share.