Wednesday, 18 June 2008

China Train Pulls Out - Set To Quickly Gain Speed

AeroMechancial Services Ltd. (TSX:V-AMA)
Basic Shares: 81 million
Fully Diluted: 93 million


China is expected to install four of AeroMechanical's blueboxes next month (July) and then quickly ramp up to 11 installations per month, according to a recent note issued by Research Capital aeronautics analyst Jacques Kavafian.
The note to Research Capital clients was issued June 17th, a day after AMA President Darryl Jacobs and AMA's freshly-seated Director of Business Aviation, Richard Hayden, visited Research Capital's Toronto office.
"Installations for Chinese aircraft are expected to begin in July for two of Shanghai Airlines’ Boeing 767’s. Subsequent to these, the plan is to have four units installed in July, five units installed in August, and up to 11 units per month thereafter," Mr. Kavafian wrote.
The total number of Chinese aircraft contracted to install AMA's technology - formally called afirs(TM) UpTime(TM) - stands at 515 or over 50% of AMA's total aircraft backlog according to Mr. Kavafian.
But as orders come in from other airlines, Mr. Kavafian predicted that China's share will flutter down to 10%.
"The company’s pipeline (of aircraft contracted for installations) remains very busy, but the major catalyst will be the progress in installations in China over the next few months," Mr. Kavafian stated.
Because of the current sky-high fuel price, he also wrote that he believes AMA will alter its pricing strategy for some customers by allowing some airlines to spread the capital cost of a bluebox over the course of the contract.
And while on other airlines, the respected analyst said the 15,000-jets in the business aviation market will be a key focus for AMA, especially because of Richard Hayden's new job at AMA.
"The business aircraft sector has been booming and has become popular in new markets such as Russia and the Middle East," Mr. Kavafian wrote.
"Of most interest are companies in the fractional jet ownership area because the information provided by AFIRS could improve aircraft availability and thus improve customer service, while lowering expenses," he added.
He concluded that his earlier BUY recommendation on AMA stock and his target price of $3 per share remains in place.
Meanwhile, in other news, AMA made Canadian Business magazine's Top 100 Technology List this year, coming in under the category of Biggest Gainers in the Industrial Technologies sector.
That's because of the magazine's calculation that AMA stock rose 174.19% in one year when measured at March 31st, 2008.