Hey there,
Yes, we still very much like EIF as a long term hold. WOrth noting however, that higher oil prices are going to weigh on the company. Why? As an airline, margins will be depressed as oil goes up which can only be offset by rising prices to a certain degree. In light of Air Canada's report that they had no fuel hedged as of end of December, I took a quick look at EIF. There were no details around hedging, but in their report they did outline that high oil prices present a risk and headwind (not surprising). Long-term, we still very much like it.
Freehold is on the opposite side of the spectrum here. The environment is bullish for oil & gas companies. Freehold is likely to benefit even more considering it is a royalty company with lower costs than a producer. The company notes that a $1/bbl change in WTI represents a $2.5M increase in FFO. So, at US 90 (the high end of its own estimates, it was expecting to generate a minimum of $150M in funds from operation and would result in the company being in a net cash surplus position. At the low end (US $40 per barrel) it expected to exit 2022 with a net debt ratio to trailing FFO of 0.5. So at these prices, Freehold is primed to be in a strong cash position and top even its most bullish estimates.
Notably, the company's payout ratio would dip to below 40% and one would certain expect a dividend raise, or at the very least a special dividend. The question is...how long will this last. No one really knows, but one this that may benefit freehold is that if it can significantly reduce debt and become self sutainable on a FFO basis, it will be well positioned to also navigate a bear market. Overall, certainly a more risk play long term and performance will be pegged to the price of oil, at least in the short term. Long-term, if management executes, it can set itself up well if it takes full advantage of the current environment.
Mat