Exchange Income Corp T.EIF

Alternate Symbol(s): EIFZF | T.EIF.DB.J | T.EIF.DB.L | T.EIF.DB.M | T.EIF.DB.K

Industrials Airlines

Exchange Income Corporation is a Canada-based diversified acquisition-oriented company. The Company operates through two segments: Aerospace & Aviation and Manufacturing. The Aerospace & Aviation segment is comprised of three lines of business: Essential Air Services, Aerospace, and Aircraft Sales & Leasing. Its Essential Air Services includes both fixed wing and rotary wing operations. Aerospace includes its vertically integrated aerospace offerings that provide customized and integrated special mission aircraft solutions primarily to governments across the globe. Aircraft Sales & Leasing includes aftermarket aircraft, engine and parts sales and aircraft and engine leasing, along with aircraft management services. The Manufacturing segment is comprised of three lines of business: Environmental Access Solutions, Multi-Storey Window Solutions and Precision Manufacturing & Engineering. The Company also focuses on portable hydronic (glycol-based) climate-controlled equipment.

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Exchange Income Corp > RBC

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Post by retiredcfon Nov 08, 2024 8:16am

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Post# 36302710

RBC

Potential for them to raise their target once the dust settles. GLTA

November 7, 2024

Exchange Income Corporation

Q3 beat, 2025 guide comes in above, major acquisition - expect results to be very well- received

TSX: EIF | CAD 55.89 | Outperform | Price Target CAD 65.00

Sentiment: Positive

Our view: EIF today reported Q3 results that were ahead of consensus expectations (details below). The company also announced a major acquisition and provided 2025 guidance that at the midpoint was ahead of consensus expectations - and we therefore expect the results to be very well-received tomorrow. Key highlights from our call back from management:

2025 guide comes in ahead of consensus. Management guided to 2025 EBITDA of $690MM to $730MM which compares to consensus $693MM. Management has historically been conservative in their initial guides, and we flag numerous upside opportunities, including potential ISR and Medevac contracts. We therefore see the initial look into 2025 as potentially conservative and as a positive. Key is that the guide represents +15% EBITDA growth y/y, which we see as not appropriately reflected in the company's 7x NTM consensus EV/EBITDA valuation multiple. Finally, we flag that declining interest rates in our view will drive FCF growth over and above the increase in EBITDA.
Acquisition of Spartan Mat. Exchange announced the acquisition of Spartan Mat today for a purchase price of US$120MM, which is to be funded through the issuance of US$18MM of shares and cash in the amount of US$102MM. We view the move into the US matting business as a strategic positive reflecting meaningful long-term infrastructure funding tailwinds in the market, which we view Spartan as well positioned to capitalize on. Furthermore, we do not expect Exchange to raise equity for the deal given we expect certain convertible debt to be converted to shares in the medium-term.
Resultscomedespiteaweakindustrialbackdrop.TheQ3beatcameonstrongresultsinAviationwhichmorethanoffsetcurrent manufacturing headwinds. We believe this speaks to the diversity of Exchange's business model given significant weakness across the broader industrial environment in Q3. Moreover, management noted that the manufacturing segment has started to show signs of strength, which we believe represents upside into next year to the extent these trends persist.

Q3/24 results above consensus expectations. EIF reported Q3/24 adjusted EBITDA of $193MM, ahead of consensus $187MM (RBCe: $190MM). See Exhibit 1.

Aviation EBITDA above. Aviation EBITDA of $155MM was ahead of our $144MM estimate.
Manufacturing EBITDA below. Manufacturing EBITDA of $51MM was below our $60MM estimate.
2025 guidance announced. Management announced 2025 guidance and accordingly expects adjusted EBITDA to come in the range of $690–730MM, which compares to consensus $693MM (RBCe: $692MM). See Exhibit 2.

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• November 8 at 8:30AM ET • Dial-in: 1-888-886-7786