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Shareholders Rewarded Buying The Dips In Aimia Inc (OTCMKTS:GAPFF)

Shareholders Rewarded Buying The Dips In Aimia Inc (OTCMKTS:GAPFF)
Written by
Jarrod Wesson
Published on
March 23, 2018
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While the stock performance of Aimia Inc (OTCMKTS:GAPFF) was not beneficial in March, yet we remained bullish on this name as shown in previous piece "Did The Market Overreact On Aimia Inc. (OTCMKTS:GAPFF)?."For starters, we noted that the market overreacted to the sale of assets to a third party. The market reacted accounting for the cash per share loss, but it did not consider the debt reduction. In addition, with a cash in hand of CAD$374 million and making a lot of restructuring efforts, GAPFF seemed and still seems a good pick. Have a look at the recent price action: 1 year chart for GAPFFWhat's new?There are two new important pieces of information that are making the share price rebound. First of all, as we expected, other market participants are reacting to the decline in the share price. In February, Mittleman Investment Management, LLC, acquired more than 14.96% stake in GAPFF. In this piece, we will provide further information about its intentions. In addition, in March, the company released a new promotion through Amazon, which was celebrated by the market. The announcement made on March 19, 2018, created a large momentum in the market that pushed the share price from $1.2 to $1.6. Have a look at the recent share price action in the stock chart below: 1 month chart for GAPFFBefore we go on, let's revise what does GAPFF do to grow and enhance shareholder value. Aimia Inc. was incorporated on May 5, 2008, in Canada. The company is a data-driven marketing and loyalty analytics business. It helps clients with customer insights that contribute to make better business decisions and build relevant, rewarding and long-term one-to-one relationships.Market participants are buying As there are a lot of people out there checking the market for new opportunities, but they never last for a long time. In this case, we saw that Mittleman Investment Management, LLC, acquired a large amount of stock recently. There are two facts that we appreciate here. Firstly, this shareholder is increasing the demand for the stock by acquiring new shares, which usually leads to higher prices. But, that's not all. We believe that this new shareholder will try to make changes in the company. As a result, the share price could increase.How do we know about the intentions of Mittleman Investment Management, LLC?The document filed by Mittleman shows that it could make changes in the Board and may sell assets. The following text is what you need to know:

"The Investor disclosed in a report filed on February 6, 2018 that it may, in future, seek to effect material changes in the Issuer’s business or corporate structure including, without limitation, changes to the board of directors or management of the Issuer and/or the sale or transfer or material assets of the Issuer or its subsidiaries and in connection therewith may take such actions as are permitted by applicable law including, without limitation, the requisition of meetings of the Issuer’s securityholders and the solicitation of proxies from the Issuer’s securityholders in any manner permitted by law." Source

What's our take?We believe that Mittleman will really push the company to make changes to enhance shareholder value. In our opinion, it will not make sense to write that and then do nothing. Think about it. Why alarm the company and other stakeholders if it intends to do nothing? No, it does not make sense.With that in mind, we believe that GAPFF became a better pick. This is not only a buy-the-dip opportunity, now there is also somebody inside trying to make the share price rebound.The Promotion in AmazonOn March 19, 2018, Aeroplan, a loyalty program owned by GAPFF, announced that its 5 million active members could earn Aeroplan Miles on their purchases on Amazon.ca. More in detail, from April 24, 2017, members who visit Amazon.ca through Aeroplan.com will receive 1 Aeroplan Mile for every $1 dollar spent. Both the market and the company showed their optimism with the new promotion. Check the following words before we provide our vision:

“With an ever-increasing amount of shopping being done online, we’re thrilled that our members will now be able to earn Aeroplan Miles on Amazon.ca, allowing them to get closer to their travel plans,” said Vince Timpano, President, Coalitions, Aimia Inc.

What's our take? It seems like everybody is taking for granted that the new promotion will increase revenues. But, let's think for a moment why. In our opinion, thanks to the new business innovation, Aeroplan will get to know the type of products bought on Amazon, thus the amount of data received from the customers will increase. We believe that it is a brilliant move.What next?The market reacted to the new idea before knowing whether it really works. In our opinion, there is an opportunity here. In the next quarterly report, we will be ready to assess the revenue line. If there is a good revenue increase, we can expect another share price spike. Thus, we will have to stay tuned. Maybe, market participants can obtain more stock returns.ConclusionCurrently trading with a market cap of $260 million, GAPFF is an exciting story among small caps. With lots of cash in hand, an EV/EBITDA ratio equal to 1.66x and an Enterprise Value/Revenue ratio of 0.11x, this seems like a buy-the-dip opportunity. In addition, we are not worried about the debt ratio, which is under one. If the company keeps generating cash flow, the market will not worry either.To sum up, there is a lot to like on this name, and there are sufficient catalysts. It should be on our radar.Be sure to check out our coverage on GAPFF!Disclosure: We have no position in GAPFF and have not been compensated for this article.Image courtesy of frankieleon via Flickr.

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