AIMIA INC. (Toronto symbol AIM; www.aimia.com) owns and operates Aeroplan, Canada’s largest loyalty program. It also owns Nectar, the U.K.’s biggest loyalty program. In addition, Aimia has interests in Air Miles Middle East and Nectar Italia, as well as Club Premier, the leading loyalty program in Mexico.
The company recently reached an agreement with TD Bank and CIBC to share its Aeroplan loyalty program.
Under this new 10-year deal, which will begin January 1, 2014, TD will launch new credit cards under the Aeroplan Visa banner, including cards for frequent flyers and small businesses.
Aeroplan has over 4.6 million members who collect Aeroplan miles from participating companies. Members can exchange their miles for flights, car rentals, hotel rooms and merchandise.
Aimia makes its money from fees it charges these firms, or “partners,” to participate in Aeroplan. The company has more than 75 partners, including credit and charge-card companies (which supply the majority of its revenue) and airlines.
Investing in stocks: Aimia shares up over 22% since 2012 buy recommendation
TD Bank is now the primary credit card issuer for Aeroplan. However, the new deal will let CIBC, the former main card issuer, hang on to Aeroplan accounts held by customers who also bank at CIBC. That’s about half the Aeroplan portfolio. CIBC would also be able to issue Aeroplan credit cards to these clients for an additional 10 years.
Under this deal, CIBC will receive an upfront payment of $200 million from TD and Aimia. As well, TD will pay CIBC $37.5 million annually for the next three years.
Aimia’s shares are up over 22% since we first recommend the stock a year ago. The company’s quarterly dividend of $0.17 yields 3.7%.
In the latest edition of Stock Pickers Digest, we evaluate Aimia’s new Aeroplan deal as well as assessing the company’s other sources of growth and whether its shares can continue to rise. We conclude with our clear buy-hold-sell advice on the stock.
COMMENTS PLEASE—Share your investment knowledge and opinions with fellow TSINetwork.ca members
Do you think loyalty programs are a good thing for cardholders, or are they more trouble than they’re worth? Have you found that the rewards live up to the promises? Do you feel that the so-called “customer profiling” that occurs with these programs (it lets companies tailor their advertising to individual consumers based on their knowledge of the consumer’s buying history) is an invasion of privacy?
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