(By Balachander) Exchange Income Corp. (TSE:EIF) shares were upgraded to "Sector Outperformer" from "Sector Performer" by CIBC World Markets Inc., which continues to have a positive outlook on the conglomerate's long-term fundamentals.
Kevin Chiang, an analyst at CIBC, views the Winnipeg, Canada-based company as a defensive name given that its portfolio of companies creates a steady earning stream with greater visibility. EIF'S margins have been steadier than standalone aviation and specialty manufacturing companies.
The company's organic growth opportunities include positive secular trend in wireless infrastructure spend which should benefit Westower, improving order book at SFI and cross selling opportunities between Custom Helicopter and EIC's existing aviation business, the analyst wrote in a note.
"We view EIF's dividend as safe as we are forecasting a payout ratio of 63 percent and 50 percent in 2012 and 2013 respectively," Chiang wrote. The analyst believes EIF will look to raise its dividend after Westower has completed ramping up for its AT&T contract (i.e. could see a dividend increase in H2/12 or H1/13)."
Chiang has a price target of $27.50 on the stock.
Exchange Income operates in aviation and manufacturing businesses in Canada and the United States. The company's aviation segment provides scheduled and contractual airline service for passengers and cargo, while manufacturing segment makes stainless steel tanks, vessels, and processing equipment, among others.
On Monday, the stock added 3.87 percent to trade at $23.37 on the Toronto Stock Exchange. Over the past year, shares have been trading between $16.31 and $26.45.