Tuesday, 24 February 2009

AeroMechanical Hits A Home Run

AeroMechanical Services Ltd. (TSX:V-AMA)
Basic Shares: 82.5 million
Fully Diluted: 88 million
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AeroMechanical created a marketing plan that is turning airline executive heads around - despite the horrible economic conditions - Research Capital's aviation analyst wrote in an update report issued February 2oth.

Analyst Jacques Kavafian said AMA's new fuel management program met with an "overwhelming positive response," at a seminar AMA recently put on for a number of airlines. "AeroMechanical's new fuel management program, we believe, could be a home run because the cost saving opportunities to airlines are too great to be ignored, even (with) low fuel prices," Mr. Kavafian concluded.

Airlines are casting a nervous eye on their fuel bills, knowing what has recently dropped in price will eventually bounce back up.

"We have seen a demonstration of (AMA's fuel-saving) software and the conclusion we draw is that the product is convincing," Mr. Kavafian added.

Combining AMA's fuel management program with the technical ability of AMA's bluebox technology to record when an aircraft and its crew have both gone in and out of service gives airlines a savings potential of roughly $500,000 per year, per aircraft, Mr. Kavafian calculated.

Investors should also note that given AMA's existing backlog of business - excluding China - Mr. Kavafian predicted the Company could be cash flow positive by the third quarter, or Sept., 2009.

Mr. Kavafian wrote that AMA has a backlog of 125 orders for its bluebox technology, or AFIRS as it is formally called.

AMA currently has 150 of the blueboxes installed.

If the contract with China is fully realized, that could add another 500+ planes to the order book.

Mr. Kavafian was so enthusiastic about the fuel savings program, he wrote that AMA now has the tool it needs to break into the big markets that include the monster airlines like Air Canada. "Unless (Air Canada) has AFIRS installed, there is a lot of fuel (it) may be wasting without knowing it," Mr. Kavafian wrote.

The influential analyst predicted AMA share prices could hit $0.65, giving a projected return of 261% over the then market price of $0.18.

To read the full report, please click here.