Two Positive Outlooks For AeroMechanical
AeroMechanical Services Ltd., (TSX:V-AMA)
Basic Shares: 82.5 million
Fully Diluted: 88 million
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On a day when AeroMechanical's (AMA) share prices tumbled along with the rest of the dismal market, a very upbeat report on business jet sales was released and a recent updated analyst report was circulating.
First the business jet report.
Honeywell Aerospace issued its much anticipated annual report which concluded that despite cratering stock markets around the globe, demand for new business jets will be flying high.
Honeywell forecast that record deliveries of 1,200 newly-crafted business jets will occur this year, a full 15% above last year's levels.
And next year, Honeywell predicted between 1,300 to 1,400 business jets will be shipped to new customers.
The demand for sleek, new corporate flying machines is being fuelled outside the traditional markets of the United States. Instead, demand is heating up in Asia, the Middle East and Europe, the Phoneix-based company found.
So while the epicentre for the financial market meltdown is in New York, other markets around the globe are more than picking up the slack.
AMA's recently appointed President, Dick Hayden, is at the annual National Business Aviation Association (NBAA) convention in Florida this week along with Jack Olcott, a director on AMA's board who was also a past president of the NBAA.
Mr. Olcott is considered the father of the NBAA and both he and Mr. Hayden are pressing the business aviation market hard.
And speaking of other global markets, Research Capital aeronautics analyst, Jacque Kafavian, issued a quarterly update Oct. 1st, in which he wrote that the rate of installations of AMA's patented technology could pick up dramatically in China now that the first two AMA units were purchased by Shanghai Airlines.
"The next step," Mr. Kafavian wrote," is to receive a larger purchase order and payment from China to signal the installations will progress at a rate of about eight to 10 units each month for the remainder of the year and possibly increase it to 20 (installations) per month starting in January."
Mr. Kafavian also wrote that he expects 95 installations to occur this year followed by 319 units in fiscal 2009 and 377 units in fiscal 2010.
Given the above installation rate, Mr. Kafavian calculated that AMA's 2009 EBITDA would be negative $1.8 million, followed by a positive EBITDA of $6.5 million in fiscal 2010.
Mr. Kafavian concluded that AMA stock remained a BUY in his Oct. 1st. report.
3 comments:
When will the company have to raise money?
When and how much will the company have to raise additional funds until they are self sufficient?
The last financial statements filed by AeroMechanical on SEDAR shows working capital at $5.3 million.
At the last annual meeting, AMA Chairman & CEO Bill Tempany said he could not give a forecast of when the company would be break even because of the airline industry's problems created by high fuel prices and troubled markets.
While AMA will neither agree or disagree with analyst reports, please see below the full report issued Oct. 1st by Research Capital aeronautics analyst Jacque Kafavian.
Mr. Kafavian wrote:
"AeroMechanical Services Ltd.–BUY: Our target price is $1.60.
On September 12, the company announced that it has received US$48,000 for installation on the two Boeing B767's from Shanghai Airlines.
Installations are expected to occur in late September.
The next step is to receive a larger purchase order and payment from China to signal the installations will progress at
a rate of about eight to 10 units each month for the remainder of the year and possibly increase it to 20 per month starting in January.
On September 18, the U.S. Patent Office completed its review of the company’s U.S. Patent No. 7,203,630 and concluded that it was
validly issued. In September 2007, Star Navigation (SNA-TSX V) requested the U.S. Patent Office to review AeroMechanical ’s patent for possible infringement. With this positive ruling, it has removed a large overhang on the stock.
Star’s patent infringement case in the Northern District of California was re-filed at the beginning of the month and AeroMechanical has filed another motion to dismiss.
It has already been dismissed by the courts twice and with this recent ruling from the U.S. Patent Office upholding its patent, it should provide further defense for the company.
The company has 111 units
installed, excluding the 27 Aloha Airlines units because of the bankruptcy of that airine.
Year-to-date, the company has 44 units installed and we expect another 51 installations by year end, for a total of 95 in fiscal 2008, 319 units in fiscal 2009, and 377 units in fiscal 2010.
Our fiscal 2009 and fiscal 2010 EBITDA estimates are $(1.8)million and $6.5 million, respectively,
while our fiscal 2008 EBITDA is a loss of $(7.1) mill ion. Based on our fiscal 2010 EBITDA and
valuation multiple of 20 times, our target price remains at $1.60. We remain a BUY on the stock and believe that the current share price level presents a good buying
opportunity."
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