Wednesday, 12 September 2007

AeroMechanical Hugh Cleland's #1 Pick

AeroMechanical Services' (AMA - TSX V) share volumes rose sharply immediately after Northern Rivers fund manager Hugh Cleland said on a Sept. 12th BNN TV broadcast that he was making AeroMechanical his top pick for small cap stocks.
Cleland said the tracking, communication and censoring technology AeroMechanical has, its margins and its business model make the fledgling Calgary aerospace company a very attractive buy.

The beauty of its business plan is airlines pay an up front fees to cover the costs of AeroMechanical's technology, plus a monthly fee for the next 10 to 30 years, Cleland said.

Coupled with the fact that AeroMechanical has partnered with the venerable British aerospace firm, Meggitt PLC, to sell AeroMechanica'ls technology directly to aircraft manufacturers, such as Boeing and Airbus, Cleland said he was quite excited about AeroMechanical's (AMA) prospects.

"You got a business model with AeroMechanical where they are being installed in an airplane - an asset with a 10 to 30-year-life - getting a recurring revenue model for 10 to 30 years," Cleland said.

The well-known fund founder and manager said he had purchased AMA stock between $#0.40 to $0.80 in the past and that he was "very comfortable" buying in its current trading range of $0.60 to $0.70 range.

"Once they finish installing their two-year backlog of 650 planes, you are going to be looking at EBITDA margins of around 50%, which is extraordinary," Cleland concluded.

"Again, 10 to 30 years of monthly recurring revenue, that kind of visibility gives you ridiculous multiples, along the lines of Absolute Software, which I've always said is the poster child for sustainable competitive advantage. "

To view the BNN program please click here.
On a previous Sept. 7th BNN TV show, Cleland said he was going to the National Business Aircraft Association annual show and convention in Atlanta, Georgia in the last week of

September to talk to business jet aircraft manufacturers about their installation plans for AMA's tracking and communications technology.

Cleland said he was also going to talk to a top Meggitt executive before completing all of the due diligence required to take the next step past choosing AeroMechanical as his number one pick and that is to place AeroMechanical in a "core" position for his Northern Rivers fund.

Putting AeroMechanical in a core position, would result in his roughly $100 million fund investing much more heavily in the company.

At the same time as Cleland's broadcast, AeroMechanical funded production of a video of all the services it provides to the aerospace industry. To view that video please click here.