Author Topic: AIM.TO - Aimia  (Read 68255 times)

bizaro86

  • Hero Member
  • *****
  • Posts: 622
Re: AIM.TO - Aimia
« Reply #250 on: February 07, 2018, 01:08:25 PM »
Here is an interesting analysis that would tend to validate a more optimistic assessment:
https://seekingalpha.com/article/4143261-aimia-clown-car-fell-gold-mine-still-golden

There is a lot of info circulating on Aimia and the quality is uneven but this piece is quite good in terms of business insights and relevance.
Still, the author describes a potentially favorable transition and, at the same time, suggests that the Board and mangement should be replaced...
Recent Sedar disclosures suggest that a shareholder may want to take a more active role.

I viewed this investment mainly as event driven and not as a transition opportunity.
AIM will report Q4 numbers on Valentine's day.

Some of the assumptions there don't seem very conservative. The part where they take the PV of the remaining term on the Mexican contract and then put a terminal value at that level seems especially aggressive to me. I know their airline partner owns part of the business there, but why wouldn't you expect the terms to get worse on a renewal.

I don't think Air Miles is analogous at all, and Aeroplan has negative momentum getting new partners, which they had even prior to losing Air Canada. They lost Sobeys (big grocery chain) to Air Miles when they bought Canada Safeway. They also lost Rexall to Air Miles. Basically, aeroplan is the second tier here, and without Air Canada I don't see why retail partners would sign up. If they get Porter or someone similar maybe that helps, but why would those (second tier) airlines give them a big discount?

Air Canada gave them the discount because they were selling Aimia equity for big $$. What does someone else get out of it? Maybe you get 3% off for buying in bulk, but that'd be about it.


StubbleJumper

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 946
Re: AIM.TO - Aimia
« Reply #251 on: February 07, 2018, 03:54:51 PM »
Well, that's certainly the optimistic viewpoint, and it might actually work out that way.  AIM will be okay if their Aeroplan mile holders do not rush to the exits.  And on that point, so far, so good.

The risk is principally one of cash flow as rewards reserves are  only ~$400m while the value of outstanding miles awarded is $2b+.  You can add some cash from ops to that, but you still end up with considerably less cash available to fund rewards than the value of the outstanding miles.  If a healthy percentage of plan participants redeem, it could be ugly.  For whatever reason, the Seeking Alpha cash stress test doesn't seem to have examined scenarios where participants redeem more heavily. The rest of the cash flow analysis looks thorough and has reasonable assumptions, but there is also much doubt about the acquisition of retail partners as AirMiles seems to have already wrapped up the most attractive targets.

Beyond the risk of higher redemptions, there remains much doubt in my mind about the behaviour of credit card holders.  In particular, to my knowledge all of the cards have an annual fee.  Are people going to continue to collect de-valued Aeroplan miles and blissfully pay the annual fee and forego other rewards?  Certainly consumers have demonstrated a great deal of inertia in their behaviour, but how many will get a clue and switch to a better credit card?  The cash stress test assumes that they'll lose 10% of the credit card mile accumulation, but it is reasonable to believe that 90% of card holders will be oblivious to what is happening to the program, or too lazy to bother changing their credit card to a different program? I'm a little surprised that the pessimistic case didn't contemplate a higher level of abandonment.

I would certainly acknowledge that most Canadians seem blissfully unaware of what is happening to Aeroplan, but is it truly reasonable to expect this to continue through 2020?  The next couple of quarterly reports will be fascinating.


SJ

Cigarbutt

  • Hero Member
  • *****
  • Posts: 854
Re: AIM.TO - Aimia
« Reply #252 on: February 15, 2018, 05:24:17 AM »
Q4 results are out.
SE (even including goodwill and intangibles) is negative as the real value of the Nectar franchise is off the books.

My take, on the whole, is the absence of a major break in the trend. Aimia will try to become a "better" basic loyalty plan that will look very much like Air Miles which is already well established in the Canadian (crowded?) market. So, over time, I expect a declining intrinsic enterprise value. May not be a straight line.

Too early for a significant trend but dissecting some significant numbers for the core Aeroplan coalition program:

Accumulation activity 2017 (YoY variance, %):   Q1:5,4   Q2:1,2   Q3:2,0   Q4:(0,9)
Redemption activity 2017   (YoY variance, %):   Q1:3,9   Q2:1,8   Q3:4,7   Q4:9,9

petec

  • Hero Member
  • *****
  • Posts: 1306
Re: AIM.TO - Aimia
« Reply #253 on: February 15, 2018, 06:06:48 AM »
Ha - that trend is really interesting!

StubbleJumper

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 946
Re: AIM.TO - Aimia
« Reply #254 on: February 15, 2018, 08:59:30 AM »
Q4 results are out.
SE (even including goodwill and intangibles) is negative as the real value of the Nectar franchise is off the books.

My take, on the whole, is the absence of a major break in the trend. Aimia will try to become a "better" basic loyalty plan that will look very much like Air Miles which is already well established in the Canadian (crowded?) market. So, over time, I expect a declining intrinsic enterprise value. May not be a straight line.

Too early for a significant trend but dissecting some significant numbers for the core Aeroplan coalition program:

Accumulation activity 2017 (YoY variance, %):   Q1:5,4   Q2:1,2   Q3:2,0   Q4:(0,9)
Redemption activity 2017   (YoY variance, %):   Q1:3,9   Q2:1,8   Q3:4,7   Q4:9,9


Ouch.  The Q4 numbers are pretty scary.  I guess we'll see in the coming quarters whether this is a one-time blip, or a real trend that might have adverse cashflow consequences.

zhengmit

  • Newbie
  • *
  • Posts: 13
Re: AIM.TO - Aimia
« Reply #255 on: February 16, 2018, 11:53:12 AM »
What is difference between accumulation vs. gross billing?  GB is up 2.0% YoY and I assume that people are still accumulate points YoY up despite rising redemption. 

Cigarbutt

  • Hero Member
  • *****
  • Posts: 854
Re: AIM.TO - Aimia
« Reply #256 on: February 16, 2018, 01:44:44 PM »
Gross billings and accumulation activity correspond to the same basic idea: selling Aeroplan units (miles issued) for cash.
You can expect quarterly noise in the normal course of operations and there are variable promotional activities that may cause fluctuations.
Historically, the Aeroplan Program has shown a seasonal pattern with relatively higher redemption activity in the first half of the year and relatively higher accumulation activity in the second half of the year.
So too early for a clear trend and you may complement your thought process by considering how you would react as a consumer with an Aeroplan credit card going forward.
I wonder if some of the consumers who still "re-engage" may simply have a target in mind before more definitive redemption?
 

clutch

  • Sr. Member
  • ****
  • Posts: 273
Re: AIM.TO - Aimia
« Reply #257 on: March 12, 2018, 09:34:38 PM »
Looks like they lost the partnership with Esso as well:
https://www.aeroplan.com/essonews.do?currentLanguage=en#esso-faq

gokou3

  • Lifetime Member
  • Sr. Member
  • *****
  • Posts: 429
Re: AIM.TO - Aimia
« Reply #258 on: April 11, 2018, 04:56:27 PM »
Some passionate writing here:

Time To Grab My Pitchfork (AIM Edition)
http://adventuresincapitalism.com/2018/04/11/time-grab-pitchfork-aim-edition/

Disc: long preferred B, no voting rights

bizaro86

  • Hero Member
  • *****
  • Posts: 622
Re: AIM.TO - Aimia
« Reply #259 on: April 11, 2018, 05:19:25 PM »
That could have used more math and less immolation graphics. I don't see how you can get to that price target on what will be left after they drive aeroplan into the ground.

I think if a second tier or startup airline was looking for a partner, they'd pick PC Optimum over aeroplan.

Recap: aeroplan has lost a big grocer, a big pharmacy, and a big gas stain chain in the last few years. PC Optimum is a new program that has the biggest grocer, the biggest pharmacy, and the gas station that aeroplan lost. I know who I'd pick.