Aimia is still undervalued, Industrial Alliance says

Following the sale of Aimia’s (Quote, Chart TSX:AIM) Aeroplan loyalty business, Industrial Alliance Securities analyst Neil Linsdell remains bullish on the stock.

This morning, Aimia announced that Air Canada, Toronto-Dominion Bank, Canadian Imperial Bank of Commerce, Visa Canada Corp. and Aimia had entered into an agreement in principle for the acquisition of Aimia’s Aeroplan loyalty business. The deal will happen for $450-million plus the assumption of approximately $1.9-billion of Aeroplan Miles liability.

“We are pleased to see that an agreement in principle has been reached as Aeroplan members can continue to earn and redeem with confidence,” Air Canada CEO Calin Rovinescu said on behalf of the group. “This transaction, if completed, should produce the best outcome for all stakeholders, including Aeroplan members, as it would allow for a smooth transition to Air Canada’s new loyalty program launching in 2020, safeguarding their miles and providing convenience and value for millions of Canadians.”

Linsdell says since he had already integrated $450-million in value for the Aeroplan program not much has changed with regards to his valuation.

“The revised $450M offer price by the consortium is in line with our valuation assumptions,” the analyst says. “The transaction will likely fully strip Aeroplan out of Aimia and leave shareholders with the remaining investments, namely a 49% stake in PLM, 3M shares in Cardlytics, and several other small investments. Assuming this transaction completes as anticipated, the next step will be for Aimia to lay out a going forward plan with the remaining assets.”

In a research update to clients today, Linsdell maintained his “Speculative Buy” rating and one-year price target of $5.00 on Aimia, implying a return of 30.2 per cent at the time of publication.

Linsdell thinks Aimia will generate EBITDA of $199.1-million on gross billings of $1.46-billion in fiscal 2018. In 2019, he expects the company will generate EBITDA of $204.4-million on a topline of $1.44-billion.