Tuesday, 7 October 2008

Two Positive Outlooks For AeroMechanical

AeroMechanical Services Ltd., (TSX:V-AMA)
Basic Shares: 82.5 million
Fully Diluted: 88 million


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.