Thursday, 4 September 2008

Analyst Target Price Stays, Star Back In Court

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

Research Capital Corporation analyst Jacques Kavafian cut investor tensions by sticking with his 'Buy' recommendation on AMA stock and keeping with his AMA share target price of $1.60.

Two months ago, Mr. Kavafian chilled investors warning he may reduce his share target price a second time if AMA did not get a signed deal with a Chinese airline before Aug. 31st.

But AMA made the deadline after unveiling a purchase order for two of AMA's blueboxes from Shanghai Airlines causing Mr. Kavafian to leave his calculator alone.

In the industry overall, Mr. Kavafian said in his most recent Sept. 3rd report that airline orders for new aircraft are slowing as expected this year. As a result, airlines around the world ordered 42 aircraft in August/08, compared to 221 aircraft the same month last year.

On the bright side, he wrote that this fuel-price-induced slide in aircraft sales will spur airlines to purchase new fuel-efficient airplanes. With that, and the still-strong business jet industry humming along, Mr. Kavafian predicted aircraft sales will pick up again starting next year.

Mr. Kavafian also opined that the recent management shifts at AMA will, "improve efficiency, reduce costs and drive revenue growth."
He expected that by the end of this year, AMA will have racked up 95 installations, taking total units installed to 206.

Mr. Kavafian further predicted AMA's customers could install 319 units in 2009 and 377 units in 2010.

(AMA has now adopted the position that it will attach disclaimers on all analyst reports by stating it does not necessarily agree or disagree with the analyst's conclusions.)

On another issue, the bullboards were alive with reports - confirmed by AMA - that Star Navigation re-filed its patent infringement lawsuit against AMA in Northern California.

Star has now named Hilary Vieira - its former top executive and the man who holds one-half of the patent that Star pins its business on - as a defendant.

Roughly translated, that means Star is suing one of its own patent holders for infringing on his own patent.

Alice in Wonderland or litigation lawyers would understand that.

But ordinary investors can be forgiven for being confused.