Airlease had the right idea attempting to short AL at 1.5 times book. All the leasers came public at a premium and quickly traded up to as high as two times book before slamming back to earth. Not using overly strong language to make a point, keeping in mind that these companies traded down to three dollars a share. AL will trade down or we'll trade up to parity at some point in time.
I was fortunate enough to purchase FLY, GLS and AYR when they were beaten down. GLS was taken over by AER and I thought at the time that FLY was the best in breed because management was last to cut the dividend, paid the most when they cut it to eighty cents, and used the money to effectively enhance shareholder value. These efforts continue to date. No doubt in my mind that management will raise the dividend significantly when the share price is closer to book value. AYR, at that time half heartedly alluded to a share buy back but then opted to commit to purchasing new planes. As Airlease pointed out at that time, good move for future earnings but little to show for present time.
CEO needs to have about three to four slides in the Q1 CC and presentation that fully explains the airline portfolio with various metrics that will show investors why executives think the stock is cheap and therefore why the fleet has a value greater than the GAAP stated value.
In addtion take the pretax, the adj Net income EBIDTA and explain why the AYR valuation should not be a fraction of AL.
AL has stated the AYR fleet has exposure because of its age; is this right? should AYR have used cash to buyback stock instead of buying new aircraft?
CEO needs to address thes disparities.
My understanding is that they *do* take into account the book value of each airplane when they compute "weighted average age". I think it's on that basis that AYR comes out to 10.5 years or something like that.
AYR trades at ridiculous multiples to EBIDTA, and analysts can compute that quickly. The CEO sandbags and always plays down expecttions. If AYR can'r beat $1.03 eps, the consensus for 2011 then something is wrong. The Q1 annualized is way over that amount. So what have analysts built inot the rest of 2011? bad numbers?
CEO did an anlyst day and gave no estimate of operational expectations for 2011. It is wrong to make this business look so unpredictable and broken leases always looming in the future.
I think that they will have a new CEO - but it might be FLY's or AER's CEO. In this industry where I am convinced the strengh lies in getting new airplanes at as good a deal as possible - size breeds strength. Size also contributes to borrowing money at good prices. These two items are the competitive edge. AYR does nave some niche areas - like freighters(conversion) where they do great. They also do conversions of cockpits etc to make classic planes still command good prices.
I tend to disagree that a quick change of CEO would do such wonders. Over time it could with its actions make up for the shortcomings of talking up AYR. One of the problems has been the investments by AYR resulted in great cash flows spread over the next 10 years - not in the immediate quarter - and this is a hard sell with analysts. More recently one of those planes got sold so the profit shows as a profit - something analysts understand well.
It is the CEO and CFOs job to articulate this. They both do a lousy job discussing the portfolio, its true value the yields the breakdown of the ages as they compute the eleven years.
The CEO should really evaluate his worth to AYR when we see a 65 year old veteren of the industry can attract the valuation for his start up. It is questionable how FIG and the CEO took AYR public at values over book only to allow this significant reduction to the equity investor.
A change in the CEO would drive the stock to .9% of book in a matter of weeks. Why should we have to hold a $12 stock when a new CEO with wall street experience could fitch a $15 almost instantaneously.
Amazing how these analyst articles leave out such important details. Another detail left out is how they calculate average age.
if they have 2 airplanes - one 3 years old and one 17 years old - they say they are on average 10 years old. But this is wrong -
If the 3 year old plane is worth 65 million and the 17 year old plane was bought for 2 million and then they spend 3 million to convert it - total investment of 5 million - this should be taken into account also.
It will be interesting to see a year from now the P/E ratios between the 4 leasing companies and the comparative cash flows.
I will bet you the 17 year old freighter will go down in real value a lot less then the 65 million dollar 737-800.
The real question -- who has more clout with Boeing and Airbus -- I say it is AER who continued to buy aircraft through the financial crash.
This fact is why I think AER is going to roll up AYR and FLY.
AL will sell shres at 1.4 times book. The monies raised will buy more airliners. In one year AL will have less equity than AYR a smaller fleet that yields less than AYR's 14%.
Valuation disparity? AL executives are well respected leaders. So AYR guys cost us significant value. AYR CEO needs to take a long look in the mirror and do the right thing. Why should not AYR trade at least at the average of its other peers at .85 times or $14.25?
Need new leaders, fact!
AL sold 30 million shares for $26.50.
How could the same investment bankers/and soon their anlysts who cover AYR and are not pounding the table that AYR is a buy but can value AL at $26.50 per share?
our CEO should be ashamed of hmself. He should be put back in a executive management role, but surely has failed as a CEO of AYR. His job one is to maximize stockholder value and he has not done that and shows no ability to do it in the future.
AL is being valued at over 1.4 times book value.
It Q4 revenue generated only 9% on a fleet of 46 airliners. All monies raised will be used to increase the size of the fleet. in one year AL will still be smaller than AYR.
Why the valuation disparity?
AL executives are respected leaders. An article says peers trade at .8-.9 times book.noy AYR at .85 times book that would be a stock at $14.25 before giving affect for a debit in equity that will eventually disappear against debt/derivative liability.
AYR CEO should take a long look in the mirror and do the right thing for his stockholders. Is he up to the task?