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Aircastle LTD Message Board

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  • youcanpickum youcanpickum Jan 23, 2008 2:02 AM Flag

    AYR down and GLS up

    This is a Smith Barney report on FLY which I also like:

    Global Aircraft Leasing Fundamentals and Opportunities
    Remain Strong - Aircraft values and lease rates remain
    strong, driven by emerging market demand and OEMs being
    sold out to 2012. Reduced credit market capacity could
    limit future growth for the industry, but B&B Air is
    advantaged after recently completing a $853m debt
    securitization and $1.2 billion credit facility. The recent
    115 bps fall in LIBOR more than offsets any credit spread
    increase.
    * Attractive Aircraft Lease Portfolio - The initial
    portfolio of 47 planes is well diversified in terms of
    customers, regions, lease terms and aircraft types. Average
    age of 5.7 years compares favorably with a global average
    of 13 years.
    * Attractive Dividend Yield and Growth Characteristics -
    B&B Air differentiates itself from Genesis, its closest
    comparable, by targeting annual acquisitions of at least
    $700m, some of which is already contracted. It targets DPS
    growth of 10-15% p.a. versus 5-10% for Genesis. We expect
    24% DPS growth in 2008.
    * Strong Backing of Babcock & Brown - B&B Air is more
    important to its sponsor than Genesis is to GECAS. Babcock
    & Brown is a specialist fund manager and has a track
    record. Conflicts of interest are possible but unlikely.
    * Initiating Coverage with Buy/Medium Risk (1M) Rating and
    $28.60 Target Price - Based on a yield of 12% applied to
    our 2008E forecast distributable cash flow per share of
    $3.43. This is equivalent to a dividend yield target of
    8.0%. The shares offer a very attractive 11.1% current
    dividend yield. After falling 22% from its IPO price of
    $23, the shares offer aircraft assets at a 20% discount to
    market value with attractive funding in place.

    We expect significant capital and dividend growth over the next two
    years, driven by B&B Air's intention to grow its initial portfolio of $1.47
    billion by at least $700m (48%) per year. Initial capital growth is driven
    by B&B Air's aircraft acquisition rate, rising market lease rates and
    increasing leverage to its target level. We expect its dividend yield to be
    in the 8-9% range over time, driven by a 70-75% payout from
    distributable cash flow. At the current share price of $17.86, the
    dividend yield is an attractive 11.1% based on an already declared DPS
    of $0.50 for 4Q07 ($2.00 annualized). On our DPS forecast of $2.29 for
    2008, the prospective dividend yield is 12.8%.

    However, such a high payout ratio will require frequent equity and debt
    issues to fund aircraft acquisitions. The relatively low cash retention will
    also reduce capital growth beyond 2009, implying that equity investors
    will have to increasingly rely on income for their investment return.

    Anyway, it's a good alternative. All of these companies require new cash to keep expanding. More to follow.

 
AYR
24.57+0.59(+2.46%)May 1 4:00 PMEDT