BY ZACH ALDERDICE , CFA
Q: WHAT ATTRACTED US TO EXCHANGE INCOME CORP?
A: Pinning down exactly what Exchange Income Corp (EIF) does is tricky, but once you do, it becomes easier to understand the value of the Winnipeg-based business. At its core, EIF is an acquisition-based company that buys reasonably priced businesses with the intention of holding them indefinitely while helping to accelerate their growth. Perimeter Aviation was the first acquisition that fit this mold, and the company has since completed more than 40 since its founding in 2004.
What makes EIF stand out is that its portfolio could hardly be better suited for the geopolitical climate we are living in. EIF is the gateway to northern Canada. No airline comes close to its breadth of destinations and infrastructure across the North, whether through Perimeter, Calm Air, Canadian North or PAL. As the federal government works to develop the North and assert Arctic sovereignty, EIF is exceptionally well positioned to move people and cargo to and from the region. The same theme extends beyond commercial airlines.
For major infrastructure projects such as pipelines and hydro transmission lines, EIF’s matting business creates temporary roads across otherwise impassable terrain. In defense, PAL Aerospace manufactures, modifies and operates world-leading surveillance aircraft for governments and agencies in Canada, the UK, the Netherlands and the Caribbean, while also developing new opportunities in areas such as Greenland.
This growth helps support a consistent dividend, with an implied yield of 2.1%. The dividend has grown at approximately a 5% annual rate since the company was founded. With a strong balance sheet and significant liquidity to support both its existing businesses and future acquisitions, the outlook for EIF remains attractive.
