Author Topic: AIM.TO - Aimia  (Read 202101 times)

Cigarbutt

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Re: AIM.TO - Aimia
« Reply #620 on: February 13, 2020, 02:49:12 PM »
 I guess it speaks to the growing importance of these programs to the economics of airlines as well as the fact that the accounting for these loyalty programs is tricky and full of assumptions.


Do I decode an apprehension about the notion of playing with numbers or is it a general hunch similar to what Mr. Munger says about "bullshyt earnings" (adjusted EBITDA)?
In terms of substance:
-Looking back over a long period, Aimia has been quite pro-active with loyalty accounting and reporting and it has been possible to coherently reconcile their reported adjusted EBITDA numbers with cash flows from operations over many years with consistent balance sheet effects. I also think they dealt adequately with changing breakage assumptions. I assume that they continue to use the same framework with PLM as they were the fundamental founding partner and have remained the operator since then.

On a related note, Areomexico is going through a tough patch with the Boeing planes being grounded (they've obtained compensation for this) and with local low-cost competitors increasing market share with likely low or negative returns on capital and they are maybe realizing more the value of a loyalty operation that is fairly immune to airline cyclicality and even counter-cyclical because excess capacity can be filled giving rise to extra cash flows at times when core operations fail to produce them.

More recently IFRS 15 has come along and it seems that Aimia has integrated the standards:
https://www.aimia.com/app/uploads/2019/07/Aimia_Whitepaper_Liability-Management_Oct2018.pdf



Homestead31

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Re: AIM.TO - Aimia
« Reply #622 on: March 06, 2020, 12:40:34 PM »
In 2017, 2018, and 2019 the company (LifeMiles) which had no prior debt borrowed $495M (at 6.50% to 7.50%) in total to pay dividends, with Advent getting 30% of that, or $149M.  LifeMiles has since paid down the loan to $413M.  And while LifeMiles keeps 6 months worth of rewards payments in cash reserves, I don't know if they do so by mandate from bank partners or just their own sense of prudence.  My point is, if you can leverage these entities in such a way, clearly the lending banks are also not calculating the points liability into their leverage ratio for lending. 

And LifeMiles has a relatively sickly partner in Avianca, which is in the process of getting bailed out financially.  Aeromexico is 49% owned by Delta, and in much better shape.  If LifeMiles could take out $495M in loans for dividends, I bet PLM could take out $300M, which would be US$147M (C$194M) for Aimia, a huge chunk of cash that Aimia could access without selling their 49% stake.  Given the relentless and growing FCF at PLM, which seems impervious to recession and even the bankruptcy of the anchor airline partner, what better candidate for a leveraged recap to facilitate a special dividend payout?  Thatís probably a better idea than Aimia selling PLM for both Aeromexico (who doesn't have the money really to pay Aimia a fair price (without help from Delta) and for Aimia (given they probably get designated a PFIC without the PLM stake).
- Dr. Aybolit

Cigarbutt, if you were writing to Aeromexico a few weeks back telling them they should buy all of Aimia, you should be writing to them today telling them that given the likely damage to global air travel over the next few months or quarters, they should now be considering Dr. A's idea of extracting some cash from PLM...  seems more likely now then it did when the idea was first raised, no?

Cigarbutt

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Re: AIM.TO - Aimia
« Reply #623 on: March 06, 2020, 05:52:02 PM »
^It does look like the window for a sale is closing. Given the recent shift in global air travel, a debt-financed dividend may make sense or even an IPO, depending on the parent's liquidity need, assuming credit spreads don't widen at large and if the market wants to cooperate. Grounded planes and stranded value seem to be the themes here.

I've been looking for the Q4 2019 commentary from MIM, which (Q4 letter) usually circulates at this time of year. Given a few reasonable assumptions, Q1 seems to be associated with, so far, a brutal absolute and relative performance with potentially high redemption pressures to come. Asking for more patience in turbulent times may be challenging.

Have you seen what is happening with Cardlytics? In the last year, its price went basically 10x (with AIM selling relatively early along the way, concurrent to a seasoned offering) and then recently went down by more than 50%. This thing has been hard to value and sentiment hard to predict. So who knows?

manuelbean

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Re: AIM.TO - Aimia
« Reply #624 on: March 11, 2020, 03:15:01 PM »
Cigarbutt, why do you say that there are high potential redemption pressures? Thank you for your help.

Cigarbutt

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Re: AIM.TO - Aimia
« Reply #625 on: March 11, 2020, 05:57:42 PM »
Cigarbutt, why do you say that there are high potential redemption pressures? Thank you for your help.
I don't know the specific redemption policy at MIM but assume that investors can redeem periodically. I understand that they manage LP money and separately managed funds.
Today, MIM reported to CDN regulators that 10K shares had been bought and 534K shares were sold (presumably from SMAs).

The following is unaudited (and the numbers are estimates) and is derived from the 2019 Q3 letter and other sec filings.

Share symbol               % weight in MIM money pot (top holdings)             % performance since end of year to today (dividends not included)
      REV                                      ~20                                                                                        -30.2             
      AIM                                      ~20                                                                                        -33.9
      IGT                                       ~8                                                                                         -55.0
      AMC                                      ~7                                                                                         -49.7

Smaller holdings have done better, more in line with what happened to the R2000 index (which is down 24.0% YTD).
So, you can come up with your own conclusion at to what investors may want to consider in terms of redemption.   

samwise

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Re: AIM.TO - Aimia
« Reply #626 on: March 11, 2020, 09:55:57 PM »
If air Mexico goes banckrupt , does PLM suffer? Aeroplan used to dive whenever air Canada was in trouble, because they could then reject the contract.

Cigarbutt

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Re: AIM.TO - Aimia
« Reply #627 on: March 12, 2020, 04:45:17 AM »
The relation between Aeromexico and Club Premier (PLM) is symbiotic.
PLM's survival is highly conditional on parent survival.
The sky is not clear and it looks like there's turbulence ahead but there are potential options.
Aeroplan did its part for Air Canada in 2009.
https://www.cbc.ca/news/business/air-canada-gets-1b-in-backing-1.824549

Cigarbutt

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Re: AIM.TO - Aimia
« Reply #628 on: March 17, 2020, 04:51:42 AM »
Cigarbutt, why do you say that there are high potential redemption pressures? Thank you for your help.
I don't know the specific redemption policy at MIM but assume that investors can redeem periodically. I understand that they manage LP money and separately managed funds.
Today, MIM reported to CDN regulators that 10K shares had been bought and 534K shares were sold (presumably from SMAs).

The following is unaudited (and the numbers are estimates) and is derived from the 2019 Q3 letter and other sec filings.

Share symbol               % weight in MIM money pot (top holdings)             % performance since end of year to today (dividends not included)
      REV                                      ~20                                                                                        -30.2             
      AIM                                      ~20                                                                                        -33.9
      IGT                                       ~8                                                                                         -55.0
      AMC                                      ~7                                                                                         -49.7

Smaller holdings have done better, more in line with what happened to the R2000 index (which is down 24.0% YTD).
So, you can come up with your own conclusion at to what investors may want to consider in terms of redemption.
This is a follow-up.
Disclosure of a mistake: This (Aimia equity securities) is a painful part in the portfolios now and, somehow, the "net-net" floor is being tested. The mistake was position sizing which I let slip upwards too much. Hopefully writing it will help in maintaining rational restraints in similar situations down the road. I now (wrongly) put the fault on the previous paucity of opportunities but position sizing should be an absolute concept, not a relative one.

Update, with the same reserves described above.

Share symbol               % weight in MIM money pot (top holdings)             % performance since end of year to yesterday (dividends not included)
      REV                                      ~20                                                                                        -57.1             
      AIM                                      ~20                                                                                        -38.3
      IGT                                       ~8                                                                                         -64.2
      AMC                                      ~7                                                                                         -64.1

      R2000                                   NA                                                                                         -37.7

Since the last post, MIM has reported net sales of 147K shares of AIM common equity, at a time when their self-determined discount to in-house IV calculations reached record lows.
As far as redemption pressures, i have no clue.
"Can't you hear, can't you hear the thunder
You better run, you better take cover"
Midnight Oil

manuelbean

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Re: AIM.TO - Aimia
« Reply #629 on: March 17, 2020, 06:08:52 PM »
Hi guys, what are actually the operating risks here? What might happen, what's the likelihood, etc? Don't spare your words, please. Thank you.