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Financial Post
Scott Deveau
Jazz Air Income Fund’s plans to convert to a corporation will be announced in the coming weeks, and Walter Spracklin, RBC Capital Markets analyst, says he is confident the regional affiliate of Air Canada will be able to maintain its 60¢ distribution post-conversion on the backdrop of an improving airline industry.
This, coupled with its recently renewed labour agreements and efforts to diversify its business, led him to upgrade the stock to an “outperform” Monday. He has a $4.50 price target on its units.
“We believe the units are expected to react positively both to improving industry trends, and we expect a positive catalyst imminently when the company announces its post-conversion dividend policy in the next several weeks,” Mr. Spracklin said.
Management has said it intends to outline their airline’s plans to convert to a corporation after a shareholder meeting in September.
But Mr. Spracklin noted that its executives have already said they would like to have an “attractive dividend” policy, and that its current distribution was sustainable.
“Given the improvement in the airline industry and improving strength at Air Canada, we believe the risk to Jazz is lower,” he said. “This together with the attractive yield and upside catalyst from a positive distribution policy announcement in September leads to our upgrade to outperform.”
