Tuesday, 27 November 2007

Bright Lights For AeroMechanical In Dark Days

Like almost all other small cap stocks, AeroMechanical share prices zipped down the same greasy pole this week as markets around the world got a very serious case of the jitters.
But amidst all the noise, three positive events took place that should buoy rattled investors - at least those with an interest in AeroMechanical. The most recent event was a frank vote of support for AeroMechancial from Howard Sutton, president of Tera Capital.
Mr. Sutton told BNN viewers Nov. 26th, the soured markets, yet more delays in the China deal that may see AeroMechancial install it's patented technology in a significant portion of that country's civilian airline fleet and a questionable lawsuit from a company that claims to be a competitor to AeroMechanical all conspired to hammer AMA share prices.
Mr. Sutton said AeroMechanical has superb technology and all it will take is some good news on the contract front before share prices lift off like the jets AeroMechanical installs its technology on.
He said his company took a relatively small position in AeroMechanical but sold those stocks when they hit higher levels.
However, he told viewers he is keeping a close eye on the company - especially on any developments in the long-awaited China deal - with the idea of buying back in.
Mr. Sutton added that in his opinion the legal and regulator challenges launched against AeroMechanical by Star Navigation were nothing more than a "hiccup."
"I think that (Star's legal action) is noise. I don't think that is material," Mr. Sutton added.
To listen to Mr. Sutton's remarks please click here and move to the 8:35 minute mark.
Mr. Sutton concludes his comments at the 10:25 minute mark.
The second event that should eventually prove positive for AeroMechanical was its filings on SEDAR this week of the third-quarter financials.
In those fundamentals, AeroMechanical CEO Bill Tempany and Darryl Jacobs, President and Founder, highlighted three noteworthy elements.
The first and most critical element comes in ever-increasing revenues.
The second was a guidance of a record fourth quarter for business activity.
The third element was the near-term prospect of the first installation by an aircraft manufacture that would be a "significant move forward" in AeroMechanical's marketing plans.
On the revenue front, total revenues for the three months ended September 30th were $312,684, compared to 258,813 for the same period last year.
For the nine months ended Sept. 30th, total revenues stood at $1,623,725, compared to $775,993 for the same period last year.
In both of those same time frames, costs also rose as did net losses.
But the company has hit a tipping point on the costs versus revenues battle, Tempany noted in the management discussion and analysis that accompanies the financial filings.
"Revenues are expected to grow at a significantly higher rate than our costs because the company has the infrastructure, sales people and support organization in place to support revenue growth," the filing states.
On the marketing front, AeroMechanical is completing a request for proposal from a "major manufacturer" to install AeroMechanical's patented monitoring, tracking and communication software on that unidentified aircraft manufacturer's new jets.
"This is a significant move forward in our current project marketing timeline," the company stated in the Management Discussion and Analysis document.
Finally, on the guidance for the fourth quarter, the two senior executives stated in their Letter to Shareholders that they are expecting a "blitz of installations."
"(This is) anticipated to be the busiest quarter for installations in the company's history," the letter states in the opening paragraph.
In the same letter, the two top executives also gave a lengthy description of the dramatic governance change in China that caused the delay in enactment of its contract to install AeroMechanical technology on the commercial Chinese airline fleet.
The view the Letter to Shareholders and the third-quarter filings, please click here.
To view the Management Discussion and Analysis document please click here.