Touring EIF’s PAL Newfoundland Operations Our Conclusion
We had the opportunity to join several members of EIF’s management team,
including Mike Pyle, CEO; Carmele Peter, President; Richard Wowryk, CFO;
and Adam Terwin, Chief Corporate Development Officer, on a tour of EIF’s
subsidiary, PAL Group of Companies’ St. John’s, Newfoundland operations.
We came away from the tour with a deeper understanding and appreciation
for PAL’s operations and growth opportunities. We maintain our
Outperformer rating and $61.50 price target.
Key Points
After having the opportunity to meet with management from EIF’s c-suite and
management from the PAL Group of Companies, it was evident that the
capabilities of PAL can at times be inadvertently overlooked when evaluating
EIF as a whole. PAL Aerospace, a comprehensive aerospace service
provider, has a wide array of impressive capabilities which has allowed the
business to win contracts globally, from its home country of Canada to the
U.K. and Netherlands to name a few. PAL Airlines has been able to
capitalize on the Eastern Canada market and provide scheduled passenger,
charter, freight and medical transport services to rural and remote
communities.
What was clear after speaking with management at both PAL Aerospace and
PAL Airlines is that both businesses have a keen eye for growth. Within
Aerospace there are a number of contracts globally for the business to bid on
(some with bids already submitted), which would fit well within the
wheelhouse of the company’s offerings. One contract in particular that the
business expects to hear back on soon is the U.K. Home Office contract,
where PAL Aerospace is the incumbent provider. Within PAL Airlines the
company is executing on its contract with Air Canada, in which it is flying six
aircraft for Air Canada Express in eastern Canada. While the contract
specified it was for up to six aircraft and for up to five years, we suspect that
there is opportunity for this contract to be expanded and extended.
We view the PAL Group of Companies as well positioned to execute on the
growth opportunities ahead of it. We also believe that the growth forecasted
for the province of Newfoundland and Labrador should help drive further
growth and opportunities for the business (CIBC Economics is forecasting
real GDP growth of 5.1% in 2024 and 6.9% in 2025).
Lastly, while touring PAL’s operations, the strong culture of the employees
was evident with many having worked at the company for decades. It is clear
that PAL is an integral part of the community, just as many of EIF’s other
businesses are