Exchange Income Corp. going great

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This article was published 11/05/2022 (960 days ago), so information in it may no longer be current.

Exchange Income Corp. is in the business of buying companies with great management, at good prices that generate enough cash to allow EIC it to continue to pay dividends to its shareholders.

The company just completed its highest revenue quarter ever and this week closed its largest acquisition, paying $325 million for a Calgary company called Northern Mat & Bridge.

With travellers getting back on planes — EIC owns a half dozen regional airlines and helicopter companies including Perimeter Aviation, Calm Air and search and rescue specialists Provincial Aerospace Ltd. out of Newfoundland — and other of its larger businesses ramping up as well, the company increased its dividend for the 15th time since EIC was founded in 2004.

“EIC is raising its dividend again,” said CEO Mike Pyle. “That means the pandemic is officially over.”

As if timed to celebrate that success — emphasized by a 10 per cent jump in its share price to $42.76 after the release of first quarter results on Wednesday — it also announced it is tripling the size of Perimeter Aviation’s passenger terminal located at the end of Ellice Avenue.

The $7 million expansion, which will provide more comfortable waiting areas including special space for elders and a play area for children will be called the Gary Filmon Indigenous Terminal, in honour of EIC’s chairman who retired at the close of Wednesday’s annual meeting, his 18th as the company’s original and only chairman.

Filmon, a former premier of Manitoba who turns 80 later this year, said he was very honoured the terminal will be named after him.

“I am overwhelmed,” he said. “I had no idea that was in the plans.”

Pyle credits Filmon for instilling into EIC’s DNA the will “to do the right thing“ not because it is politically correct, but “because it is the right thing to do”.

The company is currently in the process of launching an all-expense paid pilot training program for Northern Indigenous people to provide opportunities that may not have been available in the past and to further enhance its relationship with First Nations communities that its airlines service.

Pyle said the $1 million per year investment in that initiative is a way to illustrate reconciliation, rather than just talking about it.

Filmon said he is proud of the manner in which the corporation conducts itself relative to its relationship with First Nation communities.

“We have invested in building the relationship,” Filmon said. “They are a huge customer base for us, but they are much more than that to us. It is an important relationship we must have.”

In addition to the new terminal building for Perimeter, EIC is finishing construction on a $13 million maintenance hangar on the site of the old Western Canada Aviation Museum. Calm Air will move its maintenance operations into that building and Provincial Aerospace Ltd., which won a 20-year contract to provide all the maintenance on the Government of Canada’s new fleet of Airbus C295W fixed wing search and rescue aircraft, will move into Calm Air’s current hangar.

While environment, social and governance values are clearly important to the company, it is its discipline at uncovering sustainable business with strong management in unique niches at a good price that has built its success.

“They don’t have to be sexy,” Pyle said referring to the collection of 18 companies it now owns across Canada and the U.S. “Flying to Shamattawa is not sexy. A wood mat road is not sexy. Most of the things we do — not sexy. We want sustainable real business with exceptional management teams.”

Northern Mat & Bridge has more than 300 employees and two manufacturing facilities in British Columbia near forestry operations. It builds temporary roads and bridges for resource industries like power transmission, pipeline, oil & gas, renewable energy and general construction industries.

The company is now the leader in the country and has recently significantly broaden its customer base from the oil and gas industry across the country including a big contract with Hydro One in Ontario.

Pyle said an institutional investor told him that those who do not understand the Northern Mat & Bridge acquisition, do not like the EIC model.

Cameron Doerksen, an analyst with National Bank of Canada Financial Markets, is not one of those.

In a note to National Bank customers on Wednesday where he increased his target price on EIC shares from $51.00 to $59.00, Doerksen said he likes the acquisition for several reasons including the fact it will be accretive to earnings.

“It also boosts EIC’s sustainability credentials,” Doerksen said. “The use of temporary timber mats helps minimize the impact to the environment from construction avoiding the building of gravel roads and culverts that are difficult to remediate once construction is completed. As customers and governments increasingly require a lower environmental impact for remote construction, sustainability should act as a growth tailwind for the business in the coming years.”

martin.cash@freepress.mb.ca