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AIMIA INC (OTCMKTS:GAPFF) Delivers Big Gains With More To Come

Written by

Jarrod Wesson

Published on

November 15, 2017

Today, we will talk again about AIMIA INC (OTCMKTS:GAPFF), a data-driven marketing and loyalty analytics company, which we highlighted in September. Company LogoIn our article called "AIMIA INC COM NPV (OTCMKTS:GAPFF) Is A Prime Turnaround Pick", we mentioned that after losing some clients in 2017, the company was reacting very well. The CEO, the CFO and the auditor had been changed and sales of non-core assets had been announced. Hence, the market had reacted well to the news and the share price had commenced to pick up again.As of today, we are glad that we wrote about this company.After trading around $1.80 share price level in September and October, the stock price spiked in November. It went to touch the $2.70 price mark in a short period of time.In addition, the most significant is that more than one million shares changed hands. In our opinion, it seems that market participants are becoming again interested in this company.Have a look at the following stock chart before we let you know what's going on: 1 month chart for GAPFFFor those who don't know about GAPFF, this company provides customer insights to the clients. Information from individual companies, financial institutions and loyalty rewards programs is stored, assessed, and sold. Thus, clients make better decisions and customize their products to what customers are looking for.Recent Developments - The Q3 Earnings release was the most significantSince we released our article in September, no news were released. That's why the share price didn't move at all. The only new assessments received were those written in Seeking Alpha about the stock:

However, those articles did not add anything significant. They surely created awareness about the company, which we appreciate. But, new information was not added that could modify the intrinsic value of the stock, whose price traded between $1.9 and $2.1.Things changed quite a bit in November.On November 9, 2017, the company released its quarterly earnings making the share price increase largely.What excited so much the market participants?We believe that the income and the revenues released were not the most significant. It was the strategic direction of the company what really mattered for the market.The company is moving towards a two-division structure, which is expected to significantly reduce divisional overhead and corporate costs. The company noted that this plan would start on Q4, thus be ready to check the next financial figures to be released. They may surprise.Additionally, the company noted that a restructuring plan is ongoing. Savings totaling $9 million are expected to be achieved in 2017. The expected annualized 2019 run rate is $70 million, which we appreciate very much.That's not all.It was also said that at the end of August 2017, the sale of the Canadian Air Miles trademarks had been executed.Why is that appreciated by the market?Because the company is obtaining tons of cash from the sale of non-core assets. Read the following part from the press release:

"The sale of the Canadian Air Miles trademarks contributed to a further strengthening of the cash balances. Proceeds of $53.8 million contributed to a $101.7 million increase in cash and cash equivalents to $374.8 million. Combined with short- and long-term investments in bonds and restricted cash, total cash and investments (before accounting for program reserves of $507.7 million) was at $668.6 million." Source

Financials ReleasedLet's look at the income reported.The company highlighted that gross billings were $496.8 million, down by 10.0% on a constant currency basis including the impact of divestitures. On the positive side, loyalty Units Gross Billings were up by 1.0% and the Adjusted EBITDA margin reported was 12.1%, which the market should appreciate.On the top of it, it was noted that the Adjusted EBITDA margin is expected, on core business, to be Gross Billings between $2.0 to $2.1 billion. In our opinion, it has created quite a lot of expectations for the next earnings report.From the strategic highlights, we believe that David Johnston, Group Chief Executive, said the most significant words:

"The business delivered a solid performance in the quarter. We saw good execution in our coalition programs around new partnerships and campaigns. Our Moments Worth Millions campaign demonstrated through more than 75,000 submissions how important Aeroplan is to our members." Source

Regarding the balance sheet, we highlighted the increase in cash on the side of the assets. From CAD$293 million reported on December 31, 2016, the increased cash amounts to CAD$374 million.This is what we like the most in this company.It is finally achieving its key priority, which is liquidity and cash generation. It was very clearly expressend in its earnings call:

"So to sum up progress on our key priorities is driving to a liner more efficient business, attempted to cash generation and liquidity with a focus on urgency and reframing our strategic and commercial partnerships for enterprise. The build of our cash balances gives us more flexibility through this period of transition." Earnings Call

Have a look: Increase in Cash - AIMIA INC COM NPV OTCMKTS:GAPFFThe following is the liability side. Please note that the financial debt is quite low: Liabilities of GAPFFConclusionCurrently trading with a market cap of $389 million, GAPFF is an exciting story among small caps. We believe that if the company continues with the sale of assets, the share price could go higher. This is what the market is really looking at. To sum up, there is a lot to like on this name. Congrats to all those that got in on the back of our coverage.Be sure to check out our coverage on GAPFF!We will be updating our subscribers as soon as we know more. For the latest updates on GAPFF, sign up below!Image courtesy of John Graham via FlickrDisclosure: We have no position in GAPFF and have not been compensated for this article.