Wednesday, 21 May 2008

AeroMechanical - Progress in China & Key Executive Added

AeroMechanical Services (TSX:V - AMA)
Basic Shares: 82.2 million
Fully Diluted: 90 million

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News of two major building blocks broke at AMA midweek.

The first being the hiring of a senior, internationally-acclaimed aviation executive and the second, a report that the first commitment from a Chinese airline to install AMA’s technology is about to take place.

But while the AMA share volume rose marginally in early trading, the share price still hovered in the $0.74 to $0.78 range – the spot where it has resided for the past several weeks.

In any event, the good news is that Richard Hayden, a Vice President of Meggitt, the London, England-based aviation company that AMA has been working with to open doors at aircraft manufacturers around the world, will be joining AMA full time this summer. Mr. Hayden is leaving Meggitt on excellent terms, meaning the relationship between AMA and Meggitt will continue. Mr. Hayden’s job title at AMA, effective July 1st, will be Director, Business Aviation.

He’ll be responsible to guide the first major step AMA has undertaken in installing its breakthrough and patented technology on board a brand new business jet. That will come with the near-term test of AMA technology on a Hawker Beechcraft family of business aircraft. To view the full press release on Mr. Hayden’s appointment and the breakthrough test on a Hawker jet, please click here.

Meanwhile, Bolder Investment Partners, a Vancouver-based independent brokerage, wrote in one of its daily commentaries that the news of Mr. Hayden’s appointment gives AMA great management depth, considering AMA also recently won over John Brom as COO from Aloha Airlines. “If the company (AMA) can get a roll out with Hawker, the stock is off to the races,” Bolder’s newsletter concluded.

While all of the above is good news, a portion of Research Capital’s latest report by its analyst, Jacque Kafavian, was put on Stockhouse.
It was icing on the cake for AMA.

Kafavian wrote that he was recently in China and confirmed with Shanghai Airlines that it wants to install AMA’s technology on board two Boeing 767s early next month.

Should this happen, it would be in advance of the June 30th deadline for final regulatory approvals anticipated by AMA. This is required before it could install its equipment on board any of the Chinese aircraft already under contract.
Mr. Kafavian wrote that there is urgency to complete the two installations because Shanghai Airlines’ has to ferry troops around the country in support of the Olympic torch relay within China. Mr. Kafavian also wrote that, “we fully expect that general installations (of AMA’s technology) will begin in July and several will be completed in time for the Olympics, which begin August 8.”

AMA’s understanding of the latter quote is that Mr. Kafavian was referring to other Chinese airlines that have signed contracts to install AMA’s technology, but were waiting for the expected regulatory approval on June 30th.
Mr. Kafavian also wrote that while Chinese orders represent over 50% of AMA’s contracted technology, “we believe this will decline to less than 10% over time as (AMA) increases its customer base outside China. China provides a stable long-term base for future growth,” the analyst added.
Mr. Kafavian reconfirmed his earlier advice that AMA stock is a BUY with a future target price of $3.00.
To view the Stockhouse posting on Mr. Kafavian’s report, please click here.