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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

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.


TSX:EIF - Post by User

Post by retiredcfon Nov 11, 2024 7:55am
67 Views
Post# 36306227

TD 2 (Raise Target)

TD 2 (Raise Target)

Q3/24; RECORD RESULTS WITH & MORE GROWTH AHEAD

THE TD COWEN INSIGHT

Increasing target to $68 from $67 and maintaining BUY. Higher target reflects forecast update, unch multiple (7.5x EBITDA), and shift-forward in val-period to 4Q ending Q3/26 (from Q2/26), partially offset by higher net debt. Our bullish thesis is unch. Strong Q3 results, organic and new contract driven A&A growth along with Q4 acquisition and potential for others in 2025 to drive growth.

Impact: SLIGHTLY POSITIVE

Our higher forecast reflects the carry-forward impact of Q3/24 results, Spartan acquisition (revenue and financing), Newfoundland fixed and rotary-wing contract, and other minor modelling updates. Q3 adj. EBITDA of $193mm (TD/cons: $183mm/ $186mm). Adj. diluted EPS was $1.18 (TD/cons: $1.07/$1.21). Exchange reported strong results, with consolidated EBITDA and EPS above our forecast. The strong results were primarily due to 25% y/y growth in A&A segment (EBITDA stronger-than-forecast) driven entirely by organic growth (BC, Manitoba, Nunavat medevac, Air Canada contract, leasing revenue).

Project delays at Window Solutions (MSWS) and Precision continue to pressure Manufacturing EBITDA (higher-than-forecast but down 5% y/y). Although disappointing, management noted booking momentum from Q2 continued into Q3 ($100 million MSWS orders in past 6 weeks) with expectations for further strength as macro and geopolitical uncertainty is reduced . We estimate y/y growth in Manufacturing EBITDA inflects positively mid-2025 as bookings come into production.

We think investors should focus on the strength in A&A (>80% of 2024E EBITDA). The lagging Manufacturing and MSWS results are requiring investor patience, but we believe upside potential/valuation more than offsets the risk/uncertainty.

Management outlook remains unchanged. 2025 guide implies 15% y/y growth in EBITDA based on A&A organic growth and Manufacturing M&A. The potential award of the FAcT, Northwest Territories medevac, and Australian ISR contract could provide incremental upside to guide/forecast (13%/13% adj. EBITDA growth in 2024/2025).

We continue to view Exchange as an excellent opportunity for yield-focused investors who also appreciate its diversification, prudent leverage, and M&A-driven growth potential. At 7.0x fwd consensus adj EBITDA, it is below trailing 5-year average of 7.3x, yet we view its growth outlook, b/s, financial performance and other factors as supporting higher than historical valuations.



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