Please note the views expressed in this post are those of the member posting and not necessarily those of the BBGA
Air Partner (BUY) – AIR appointed by Saudi Arabian Airlines as remarketing agent for 15 Boeing aircraft
AIR LN (122p, TP 160p), Market Cap: £64m
Our view: AIR has been appointed to remarket 15 Boeing aircraft for Saudi Arabian Airlines. This is a good opportunity for the Group to accelerate growth in this activity and it supports the wider strategy to diversify revenues. Our forecasts are unchanged at this time but execution of these plans should support good growth in earnings already indicated for this year. The Group’s valuation is attractive, trading on a calendar 2017e PE of 15x vs. the FTSE Support Services sector on 16.7x; dividend yield 4.5%. Our TP is 160p, BUY.
Saudi Arabian Airlines – AIR’s Aircraft Remarketing division has announced an important deal with Saudi Arabian Airlines to be its exclusive remarketing agent for 15 Boeing 777-200ER aircraft. Saudi Arabian is undergoing a major enhancement of its fleet which includes phasing out these aircraft. We believe that the secondary market for these flexible and tri-class aircraft is strong, and this represents a good opportunity for AIR’s Aircraft Remarketing division (formerly Cabot Aviation) to accelerate its growth plans. At this stage our forecasts are unchanged but execution of this programme should lead to more upside.
Cantor research and valuation – We initiated coverage of AIR in May (see: A strong platform for growth, 9 May 2017). The Group is transforming into a diversified global aviation services provider, with its strong charter broking business now combined with growing aircraft remarketing, aviation consulting and training divisions. AIR reported full year results in April with profits up 17% y-o-y helped by recent acquisitions. We forecast double-digit earnings growth and healthy free cash generation this year, and expect more bolt-on acquisitions. The Group’s valuation is attractive, trading on a calendar 2017 PE of 15x vs. the FTSE Support Services sector on 16.7x; dividend yield 4.5%.
Risks and TP – Demand for business jet flying and consulting, training and remarketing services. Acquisition integration and external shocks. Our TP is derived using a 10-year DCF of net cash flows and is 160p.
Our initiation note can be seen here: .RECAP – Cantor Transport Research – Air Partner (AIR, BUY) – 9 May 2017