AIMIA INC. $14.95 (Toronto symbol AIM; TSINetwork Rating: Extra Risk) (514-205-7315; www.aimia.com; Shares outstanding: 172.2 million; Market cap: $2.6 billion; Dividend yield: 4.3%) got its start as Air Canada’s frequent-flyer program in 1984. In 2005, the airline created the Aeroplan Income Fund and began selling units to the public.
The fund converted to a corporation under the Groupe Aeroplan name in 2008. In May 2012, it changed its name to Aimia.
Moving beyond Aeroplan
When it first sold units to the public, the company’s main asset was its ownership of the Aeroplan Miles frequent-flyer program. Now, however, it owns or has stakes in a wide range of loyalty programs and other businesses around the world.
In Canada, Aimia owns and operates Aeroplan, the country’s largest loyalty program. Aeroplan has over 4.6 million members who collect Aeroplan miles from participating companies; Aimia makes its money from fees it charges these firms, or “partners,” to participate in Aeroplan. The company has more than 75 partners, including creditand charge-card companies (which supply the majority of its revenue) and airlines.
Aimia also owns and operates Nectar, the U.K.’s largest loyalty program, with over 18.5 million members. Pick of the U.S. Technology Stocks ACI is set to soar; Europe slows Symantec The company estimates that more than 50% of U.K. households collect Nectar points on everyday purchases such as groceries, holidays, gasoline and car repairs. Companies that participate in the Nectar program include Sainsbury’s, BP, Homebase, British Gas and Expedia. Members also earn Nectar points every time they shop online, via nectar.com, at over 500 retailers.
In Italy, Aimia owns 75% of Nectar Italia, which has over 9 million members. Its current partners include a range of Italian retailers, including Sma, Api Ip, Auchan, UniEuro, PC City, So Oney and Hertz. Members can also earn Nectar Italia points at participating shopping websites. Nectar also offers a credit card that lets holders earn points on all their purchases.
As well, Aimia holds 60% of Rewards Management Middle East, which owns Air Miles Middle East, the leading loyalty program in the UAE, Qatar and Bahrain. HSBC owns the remaining 40%.
Launched in 2001, Air Miles Middle East now has over 1.3 million members who collect Air Miles from over 120 major companies. Air Miles Middle East also runs HSBC’s My Rewards Points Program in Jordan, Egypt, Lebanon and Oman.
In Mexico, the company owns 29% of Club Premier, the country’s leading loyalty program, with more than 2.8 million members and 50 partners. Club Premier members can earn and redeem points on airlines, such as Delta and Air France-KLM. They can also earn points for using the American Express and Banamex co-branded credit cards.
Bright future in analytics
In addition to its loyalty programs, Aimia has a minority interest in Cardlytics, a U.S.-based company that lets merchants target offers at consumers based on their credit- or debit-card purchases. These promotions are delivered through online and mobile banking services. Cardlytics also provides analytics services to help companies analyze consumer spending patterns.
In the three months ended June 30, 2012, Aimia’s revenue rose 2.2%, to $554.3 million from $542.4 million a year earlier. Excluding one-time items, earnings per share rose 81.8%, to $0.40 from $0.22. The company’s cost per mile awarded dropped significantly, partly because it is making better use of its computer systems. Redemptions also fell.
eBay U.K. has just announced that it is joining Aimia’s Nectar loyalty program. The U.K. eBay web- site attracts as many as 17 million unique visitors a month. Nectar cardholders will be able to collect points automatically when they shop on eBay. Shoppers who are not Nectar cardholders will also be able to apply for a card via the eBay website.
Aimia continues to diversify its operations geographically. That’s offsetting the risk of its Canadian business: Air Canada, a major Aeroplan partner, is vulnerable to labour disputes that can disrupt its service. Aimia is also well-positioned to capitalize on the rising use of analytics to better target loyalty programs.
The company will probably earn $1.48 a share in 2012. The stock trades at 10.1 times that forecast. The slow economic recovery could hinder its growth, but its long-term outlook is positive. Its 4.3% yield adds appeal.
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