Cargojet Inc T.CJT

RBC (2 Positive Reports)

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January 23, 2023

Cargojet Inc.
Connecting The Dots: CJT flash read-through – RBC’s Annual Cdn eCommerce survey

TSX: CJT | CAD 115.06 | Outperform | Price Target CAD 247.00

Sentiment: Positive

Our view. Today RBC Dominion Securities Analysts Irene Nattel and Sabahat Khan published their 5th Annual RBC Canadian E-commerce Survey. Overall, we believe the survey results provide a positive read-through for CJT based on Cdn consumer eCommerce purchasing patterns. For example, in 2022, 31% of survey respondents made an online purchase at least once a week (up from 29% and 26% in 2021 and 2020 (resp.) when the pandemic was at its worst). Interestingly, a growing number of respondents (22%) said that more than 60% of their purchases were now online (vs. 21% and 23% in 2021 and 2020, respectively). While these results show 2022 eCommerce adoption was roughly in line with levels seen during the first year of the pandemic, key is that adoption remains well above 2019 levels and therefore highlights some consumer stickiness following elevated e- commerce usage in 2020. We would also point to an increase in Amazon Prime membership as a direct benefit to CJT, as members are provided with next day delivery, and next day delivery favours air freight.

Our update with CJT. Cargojet has indicated that October and November were strong but that December deliveries (traditionally their strongest month) were below expectations (including those of their customers). This has prompted CJT to be more cautious on its outlook (the company still expects growth next year, just slower). We continue to see eCommerce “normalizing” to something below pandemic, but well above pre-pandemic ... and then growing off that base going forward.

What happened? RBC Dominion Securities Analysts Irene Nattel and Sabahat Khan yesterday published their 5th Annual RBC Canadian E-commerce Survey. 

January 23, 2023

Cargojet Inc.

Government of Canada investment at Hamilton Airport meaningful positive for CJT

TSX: CJT | CAD 115.06 | Outperform | Price Target CAD 247.00

Sentiment: Positive

Our view. Today, the Minister of Transport, Omar Alghabra, announced an investment of up to $23.5MM under the National Trade Corridors Fund for an expansion and sustainability project at Hamilton Airport. We view this as a meaningful positive for CJT and as providing a platform for current and future growth at the company's major hub. We had a chance to catch up with management following the announcement who highlighted the "tremendously positive" investment in airport infrastructure will allow CJT to safely operate B777F aircraft as well as expand apron parking/handling areas, improve aircraft de-icing operations and increase access. Overall, CJT remains a top investment idea despite near-term macro headwinds that we expect to negatively affect volume in H1/23 - we continue to view the long-term FCF generation potential of the company as underappreciated by the market at current share price levels. See our Q4 preview note here.

What happened? Today, the Minister of Transport, the Honourable Omar Alghabra, and the Minister responsible for the Federal Economic Development Agency for Southern Ontario and Member of Parliament for Hamilton West–Ancaster–Dundas, the Honourable Filomena Tassi, announced an investment of up to nearly $23.5MM under the National Trade Corridors Fund for an expansion and sustainability project at the John C. Munro Hamilton International Airport.

This project, which will cost close to $47MM, will allow the Hamilton International Airport to:

• handle increased cargo operations by improving and expanding airfield capacity; 
• increase de-icing capacity; and
• build a new independent road to reduce congestion.