Exchange Income Corporation is a diversified, acquisition-driven company focused on opportunities in the aerospace, aerospace, and manufacturing industries. The company benefits from a diversified source of revenue from businesses that range from Medevac transportation services, aftermarket aircraft parts, to building communications towers, high pressure water cleaning systems, and precision metal fabrication and more. Its provincial subsidiary is a global leader in marine surveillance serving governments around the world.
Exchange Income owns a unique group of companies in the aerospace and manufacturing sectors. It offers a wide range of operations in the aerospace industry, including the provision of scheduled airlines, charter services, and emergency medical services to communities in various regions. The company also offers a variety of manufactured goods and services in a number of industries and markets across North America.
The company’s main operating subsidiaries are Bearskin, Calm Air, Custom Helicopters, Keewatin Air, Provincial Aerospace, Regional One, Quest, WesTower, Ben Machine etc. Exchange income segments are Aerospace & Aviation (~ 60% of consolidated sales 2020) and Manufacturing (~ 40%). Geographically, Canada is the largest market with 61% of sales, followed by the US (25%), Europe (~ 1%) and others.
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Sales growth & market presence
Exchange Income benefits from a diversified source of income from different markets and regions around the globe. These companies have recurring revenue streams throughout their business cycle, and the particular nature of the companies increases diversity during times of fluctuation.
With its diversified subsidiaries, the group is well positioned to expand its range of services for customers. EIC is aimed at governments, first nation communities, other companies and individuals. It should also benefit from high global defense spending and the steady economic recovery in its markets. The company continuously invests in the expansion of the infrastructure to support its operations, additional aircraft and bases as well as the replacement of production systems or components.
Exchange Income grows by acquiring quality companies that have strong management teams, generate steady cash flow and instantly contribute to a profit. Last year’s acquisition of WIS contributed $ 25 million in revenue for the first quarter of 2021.
EIC saw an improved year-over-year performance in the last quarter. While scheduled air travel continues to be challenged by travel restrictions and reduced passenger traffic, the manufacturing segment is experiencing a recovery. EIC has made some investments and acquisitions in manufacturing to better position the company to take advantage of opportunities in the new normal scenario.
The company continued to carry out long-term projects including FWSAR, the expansion of the DFO contract and the Dutch contract. EIC also has a number of strategic acquisition opportunities and expects to add more value-adding acquisitions over the course of the year.
Exchange Income is a dividend aristocrat with one of the best track records of dividend growth on the Canadian Stock Exchange. A diversified business model, disciplined investments, and the acquisition of companies with steady cash flows have supported dividend growth over the years.
The company last increased its dividend payout by ~ 4% in 2019, increasing it to 4.7% annually over the past five years. It offers a hefty dividend yield of 5.7% but a high payout ratio. Exchange Income has delivered consistent annual returns of over 20% over the past 15 years. The company renewed its NCIB in February 2021 and has a maximum of ~ 3.25 million shares to buy through February 2022.
The operations of Stainless, WesTower, Quest, AWI and Provincial have long-term construction contracts that guarantee income transparency. EIC’s initiatives such as spending control and managing capital expenditure and working capital have continued to support dividend payments and deleveraging over the years. The group has no long-term debt until December 2022. A strong balance sheet further improves its access to capital for investments in strategic acquisitions and operating subsidiaries.
Exchange Income’s diversified companies offer resilient cash flow that enables dividend growth. The company has seen good growth over the past five years. It also has a good chance of benefiting from the increasing demand for communications infrastructure. F.
It is expected that future growth will be driven by existing activities, acquisitions and extensive investments. EIC has a proven track record of successfully growing its business through value-adding acquisitions. The long-term strategy of acquiring and successfully integrating diversified companies not only reduces risks, but also offers growth opportunities.
Exchange income competes with domestic and international companies. Air Canada, Westjet Airlines, Chorus Aviation, Canada Jetlines, and Ace Aviation are Exchange Income’s leading competitors.
These are leading airlines in Canada. Exchange Income’s strategy of acquiring companies that operate in a milder competitive environment and provide niche services in remote areas makes it an unparalleled leader.
The variety and flexibility of Exchange Income have positioned it better than the other traditional airlines. The company should benefit from volume improvements as travel restrictions are relaxed across national and international borders. The company’s ability to provide essential services and prompt customer service while actively managing operating costs has been key to strong dividends and a solid balance sheet.
Exchange Income is a good income generating stock with tremendous growth potential, a strong dividend history, and a decent balance sheet. Organic growth and contributions from acquisitions as well as recovery trends and pent-up demand should drive earnings growth.
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