CA - Laughing Water Capital - Aimia: A Useful Ballast To Our Portfolio

• Aimia should shortly receive about C$6.00 per share in after tax cash proceeds from the sale of PLM (Aeromexico’s loyalty program).
• Aimia is a holding company and thus will likely always trade at some discount to NAV.
• If the market continues to decline, I would expect that Aimia will outperform, and perhaps become a source of funds.

The following segment was excerpted from this fund letter .

Aimia Inc. ( OTCPK:AIMFF )

Long term holding Aimia should shortly receive about C$6.00 per share in after tax cash proceeds from the sale of PLM (Aeromexico’s loyalty program), which will bring cash and liquid investments on the balance sheet to somewhere around C$575M. The current market cap is approximately C$400M.

There is no debt, but there is ~$236M of perpetual preferred stock. Without going into detail, I think Aimia’s other assets far outweigh the preferred stock (which I would also argue should not be debited at face value since it is perpetual, trades at a severe discount to face, and a recent discounted tender offer was well oversubscribed).

Aimia is a holding company and thus will likely always trade at some discount to NAV, but what discount to cash do you need to feel comfortable here? Does it only make sense to buy ~$575M in cash for $300M rather than $400M? Keep in mind that while the dollar value of this cash has remained constant in recent months, the purchasing power of this cash has theoretically gone UP by the inverse of the market’s decline. If the economy slows, and the market continues to decline, the purchasing power of this cash will go up further still.

To be clear, Aimia likely does not have exciting upside potential like most of our other investments, but it’s soon to be cash heavy balance sheet does should act as useful ballast to our portfolio. Perhaps the market will not take notice until the cash actually hits the balance sheet, which won’t happen in a quarterly filing until Q3. This is likely a good thing as management has indicated they will be repurchasing ~$75M of stock in the near term.

As the company deploys the rest of its capital into cash generating businesses in the near and intermediate term, I expect that intrinsic value will grow substantially. At the same time, if the market continues to decline, I would expect that Aimia will outperform, and perhaps become a source of funds as other opportunities become relatively more attractive.

Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.

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