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#31 - Update on Aimia

Publish date: Feb 4, 2022
Last updated: Nov 1, 2022
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In a previous post, I asked:

aimia-q

I was actually hoping the bankrupcy proceedings would hit a wall, causing a market overreaction. Looks like it’s not shaping up that way:

I redid the calculations in my previous post (linked above) using a payment of US$375 instead of $425, and I got a SOTP value of CA$6.15 using a 1.25 USD=>CAD exchange ratio (compared to current share price: CA$5.50).

It’s about time I start working towards getting some answers to my previous questions.

Highlights from Aimia’s Q3 2021 Earnings Call.

Aimia has a stake in the following businesses:

  • Kognitiv, a loyalty-program marketing-platform, not the most exciting holding. For the quarter, revenues from continuing operations were CAD14 million, an improvement of CAD1 million over last quarter. Adjusted EBITDA from continuing operations was a loss of CAD8.5 million, an improvement of CAD3.5 million over last quarter

  • Clear Media (10.85%), in the digitization of outdoor advertising street furniture in China. Owns 61,000 commercial panels, with less of 1% of its panels currently digitized. In Clear Media’s 2021 interim report, the company indicated that the group’s total revenue for the six months ended June 30, 2021 increased by 74% year-on-year which represented 86% of the revenue generated during the third quarter of 2019.

  • AirAsia (3% stake) which is transitioning from an airline into a digital travel and lifestyle services holding company, separating its core airline business from its portfolio of digital assets such as Big Pay, one of the fastest growing fintech companies in Southeast Asia. AirAsia’s portfolio of digital businesses achieved unicorn status with a combined valuation of over $1 billion.

  • TRADE X (12.3% stake after a CA$44M investment), an innovative solutions provider to the global pre-owned car industry through its B2B cross-border automotive trading platform at a pre-money valuation of $250 million (CA$358 post). After having generated CA$74 million in gross vehicle sales in the first half of this year, TRADE X generated gross vehicle sales of CA$87 million in the third quarter alone and positive EBITDA.

Comment: assuming 5% percentage fees, that translates into annualized 87 * 4 * 0.05 = CA$17.4M revenues, probbaly closer to CA$25M with the growth, or about ~14 P/S.

We ended the third quarter with total cash excluding liquid investments of CAD70.1 million. Including liquid investments, total cash ended at CAD136 million.

Phil Mittleman: TRADE X is a very exciting investment. And probably in my career, one of most exciting I have come across. To be profitable almost from inception, growing at the rate they are growing, with partners that they have, it’s an incredibly exciting opportunity. For example, in the last month alone, TRADE X traded cars from China to Europe, from Chicago to Nigeria, from China to Mexico and Canada and Nigeria and from Japan to Kenya. We had an opportunity to get into this at a very low valuation and we are very happy with it. Closest comp out there is probably Auto One. But if you look at the multiples these things get, obviously they are tremendous.

About the Mittleman Brothers

Mittleman Brothers Investment Management had a 12.8% performance since inception, net of fees, from 2003 to 2021 (19 years), versus 11.5% for the S&P 500 and 11.2% for the Russel 2000.

Taking Aimia…reconstitution of Aimia’s board of directors in February 2020. In June, Aimia acquired Mittleman Brothers Investment Management and installed Chris as the holding company’s Chief Investment Officer and his brother Phil as its CEO.

As of June 30, 2020 Chris pegged the value of Aimia’s indicative net asset value at C$7.87 per share.

Conclusion

I’m not sure about Kognitiv, and although I like the potential of TRADE X, can’t say that investment was cheap.

Aimia just reinvested $10M in Kognitiv, and not everyone like to hear that:

I won’t be jumping in just yet. I’d like to keep following the company though.

Seeking Alpha (Jul 2020)

Chris Mittleman on The Acquirers Podcast

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