Monday, 25 March 2013

LOM Says Buy FLYHT - $0.40 Price Target

FLYHT Aerospace Solutions Ltd.
TSX Venture: FLY
Shares Issued: 140,386,166
Fully Diluted: 179,132,626


“A Global Aviation M2M Service Provider Prepares For Takeoff” is the title and theme of a just released, detailed 46 page initiation report on FLYHT Aerospace Solutions by Senior Technology Analyst Noel Atkinson at Loewen, Ondaatje, McCutcheon Ltd (LOM).

Mr. Atkinson’s writing reflects that he believes the company is nearing a critical growth junction.

“Management seems very optimistic that there are large orders being discussed and negotiated with airlines around the world. We note that one order to equip either a sizable existing fleet or a large new order at Airbus (or Boeing for that matter) could be the ‘inflection point’ order that provides credence to other airlines that the AFIRS has been vetted and is ready for prime time.”  

Mr. Atkinson is no stranger to the data over satellite business. In his former life he was Chief Operating Officer to a firm that was an Iridium reseller and sold weather data over satellite. He was also a corporate advisor to an owner and operator of an L-band broadcasting satellite constellation.

Key highlights from the report include:

  • FLYHT has laid the groundwork for expected rapid unit sales growth of its AFIRS aircraft onboard connectivity hub and UpTime fleet management software for commercial and corporate aircraft.In the past year, FLYHT has signed L3 as a partner to achieve OEM installations at Airbus, secured Jabil Circuit for highcapacity outsourced production, and launched its nextgeneration AFIRS 228 units.
  • FLYHT averages about 50% gross margins for its hardware and captures nearly $1,400 of monthly APRU (Average Revenue Per Unit) per aircraft, which we believe places FLYHT firmly at the top of the publiclytraded M2M (Machine-to-Machine) universe in terms of monthly ARPU.

  • The Company now has over 230 active AFIRS units and order activity has sharply increased during the past 12 months. Growth during our forecast period is likely focused in regions where the existing VHF network is insufficient or overloaded, including Asia, Africa and Latin America, and supported by new or proposed mandates in China and Nigeria, and over oceanic and polar routes for onboard AFIRS or sat-com links.
  • We anticipate positive EBITDA by Q42013 on quarterly revenues of less than $2.5MM. We project 2013 revenues of $7.9MM (+35% y/o/y) and EBITDA of ($785k). For 2014, we forecast $13.5MM revenues (+71% y/o/y) and EBITDA of $1.7MM, followed by 48% revenue growth to $20.0MM and EBITDA of $4.8MM in 2015.

The Howard Group does not have permission at this time to post the entire report.

More About Mr. Atkinson

Noel Atkinson has nearly 15 years of experience in buy-side and sell-side research and investment banking, with primary historical focuses in technology, business services and real estate. Noel previously served as Senior Vice President, Investment Banking for The Keystone Equities Group, a boutique brokerage based in Philadelphia, PA, where he managed the firm’s transaction due diligence activities and led its corporate advisory practice. He also has served as an Equity Research Analyst covering technology stocks for Emerging Growth Equities, Ltd., a regional brokerage located in King of Prussia, PA; and as an Equity Research Associate covering Canadian REITs and REOCs at RBC Capital Markets. Noel has been quoted in Investor's Business Daily, the San Francisco Chronicle, and several other publications. He has been a CFA charterholder since 2004 and is a member of the CFA Institute and the Toronto CFA Society. Noel earned a B.A. (Hons.) in Political Science from the University of Winnipeg and an M.A. in International Affairs from Carleton University.