Just prior to the S/O surprise, July 9th, AeR was trading at approximately 25 cents higher than FLY. Today the share price differential is approx. $5.50. Hoping that Mr Barrington takes note of what Mr Market thinks of his dilutive move. Having said that, if I were to add to my holdings today my choice would be to add to my FLY position because AER is trading more closely to it's true value. Once FLY puts their money to good use the share price should respond. Not saying that AER isn't a great company, management is doing a great job growing the business, justg that FLy is so undervalued at $14.
Daltomah- Come Nov 11th, when Q3 earnings are expected to be released, don't expect good news on the earnings or revenues side. Keep in mind that because of the dilution there will be one third more shares outstanding. While that won't impact revenues it will certainly affect earnings per share. Additionally, Mr Barrington stated during the Q2 conference call that they don't expect any end of lease revs for Q3 and that leasing revs are expected to be approximately $75 million for the quarter, down from Q2 and Q3 2012. Also, there haven't been any sales of airplanes in the quarter that may have contributed to earnings. Add to this that the company still has several airplanes off lease, thus not generating any revs or earnings. If this isn't enough bad news keep in mind that during Q3 the company only purchased two additional airplanes that would contribute to revs and earnings..
If you are new to this board you may be thinking, another basher. I'm not, in fact I often posted that FLY was the Best in Breed because in the past management did a great job enhancing shareholder value. It appears that in late 2012 management shifted focus to increasing shares outstanding. They sold off their interest in BBAM although it was generating approximately $7.5 million dollars profit per year, sold a couple of million shares to Onex at a steep discount and finally, on July 9th , massively diluted by coming out with the SO. Had the company employed the $173 million raised by the secondary to purchase assets at a discount occurred it would have justified the secondary. Three months have passed and instead of an uptick in the purchase of assets, thus far we have actually reduced the purchase of airplanes.
Still long but not so strong. While Rome wasn't built in a day, nothing get's built with inactivity.
tthemainman, thanks for the post. makes sense. my concern is that think of all the additional dividends FLY has to distribute with all the new shares. how will that impact profits? still in all, I am going to ride this one out. more than losing $ when PPS drops, I hate like Hel_ when I am too impatient and sell too quickly, only to see the rebound after I've divested. yeah, I too am still long but won't put any more in. have to say I have thought about it tho. lots of opportunities with market in freefall.
tthemainman, I divested all AYR at 17.44 and with today's market drop it is trading at 17.62. I would have been better off holding AYR and not reinvesting in FLY after the SO. Still in all, no timing is perfect and I am letting my bets ride on FLY. not only is the yield better, the potential to upside capital gains is by far better with FLY. the P/E tells me all I need to know. been wrong before but I still hold FLY long and am going to have to consider increasing my position with this market drop.
Sentiment: Strong Buy
we can expect to see sell offs from holders of shares in the secondary. typically those go fast on any uptick to the PPS. still in all, tough to see FLY take a hit on an up day in the market. patience with this position until quarterly earnings report. May take to quarters to realize the additional revenue generated from capital purchases off the SO. hope i am right.... Nearly bought again on Friday's weakness but FLY is already very heavy in my stock portfolio.
Sentiment: Strong Buy
Merovingian- While it's great to be in the black, think of how much better off you would be had Mr Barrintgton not done the secondary, used the cash to raise the dividend to thirty two cents quarterly, and did a two for one split when the share price exceeded twenty dollars per share. This is not pie in the sky thinking. Take a look at AER, over $20 a share today while they were only twenty five cents per share higher when the secondary was announced. Also, this isn't factoring in the positive impact that the substantial dividend raise would have caused.
As I opined once before, the only people that should be happy that the secondary happened are the people that purchased shares at the hugely discounted price of $14. Had the secondary not happened, purchasing at $14 would not have been possible. Because I was certain that the company was going to purchase a huge package of airplanes on the cheap with the secondary money, iI increased my holdings by eighty per cent at $14.20. Thus far, I was wrong, no package purchased. In fact, the pace of adding planes has actually slowed since the cash raise.
Still long, but not so strong.