Merrill Lynch Analyst also noted the similar age, size, and remaining lease terms of both FLY and AYR and you can clearly see FLY and AYR now have almost identical avg fleet age and remaining lease terms however, the only difference in the charts you see that graphs the data points for both companies is the Price to book ratio. Where AYR is slightly greater than 1x book, FLY is at ~0.7x book. That was his basis for his upgrade of FLY to buy. For those who use Merrill, I encourage you to look at the latest analyst report. The two charts that plots the lessors clearly show the relative undervalue of FLY.
With the business growing and profitable, announced share buyback and every country doing either QE or cutting interest rates, and did I mention oil is like 20-30% lower than last year (lower inventories and interest expense for ANW), there is no reason ANW should be down this year. With markets up over 10%, I just cant see any reason this is down like 10% this year.
They've been silent for a while and hopefully the year end tax loss selling is winding down. Could management give shareholders a Christmas gift and report financials showing metrics are all trending in the right direction and give FVE stock a boost into the new year? Even for employee morale you would think you dont want the stock ending towards lows for the year as the rest of Wall Street celebrates all time highs.
And this ML analyst was the most pessimistic of FLY and aircraft lessors in general, so good to see him go from sell to a buy. I still think FLY should be a takeout candidate. The Chinese and their soverign wealth fund are aggressively getting into the aircraft leasing business. They should really take a close look at FLY to accelerate their plans to get into the space. The price is definitely right. If not the Chinese, the bigger lessors should buy FLY as many of them are valued above book value now. So buy FLY at book, and immediately get above book valuation when FLY's assets move on to their portfolio. But until then, 8% dividend yield (that is safe) to wait it out.
Going forward, with risk of funds being siphoned off by Brazil's leaders, PBR is probably going to find it hard to get loans and issue debt. Who would buy PBR bonds given all the risk? Even if they are able to get takers, it would be at a really high interest rate. And with oil falling and interest rates spiking for PBR, it is highly probable of a slowdown in drilling.
They have issues with their financials and their auditors wont sign off on their financials because of the fraud taking place. Banks/debt holders are entitled to audited financials or there is a default, in which case, PBR can be forced to pay back loans. The mess at PBR could drastically reduce drilling as funding dries up so the question is can companies like PACD withstand another potential blow from further reduction in drilling?
So Robbin Hood raid of PBR by Dilma and Team?
Looks like Petrobras may default on its debt covenants as there is widespread corruption raiding the coffers of Petrobras. If Petrobras runs into liquidity issues, how will this impact the drilling sector?
Interesting point. But, I still don't fully understand this conflict. If BBAM really was just in it to maximize their mgmt fees, then wouldn't it make sense for them influence FLY to shut down the dividend (they've actually been increasing it) and simply get FLY to plow everything into growing the maximum fleet possible so they can charge even more?
I guess you are saying BBAM charges unreasonably high mgmt fees on FLY, making FLY's profitability suffer compared to peers. If that is the issue, then the case for investor activism or takeover becomes even more compelling as not only do you get FLY at a discount to book, there are also tons of savings to be realized because FLY is way overpaying BBAM on mgmt fees.
Can we bring in Carl Icahn to unlock value here? He is all over high divdend yeilding Transocean, which is now running into serious trouble given oil prices are crashing. Why not focus attention on FLY, which like Transocean has a big dividend, but unlike Transocean, the airline industry is booming because oil is so low and the recovering world economy. FLY is the perfect candidate for Icahn, way undervalued, solid growing company, and the perfect size where he can actually buy enough shares to influence the decision outcomes of the firm.
I think they definitely should buy back, but it is a credibility issue for them if they go and do a buyback shortly after a secondary. When management did the secondary, many questioned whether it was even necessary. It crashed the stock and was very dilutive. If they turn around and buy back shares, it further goes to show they didnt need the money and further hurts their credibility. Cash wise, these guys are in great shape and it shows from the analysts' questions centered on use of excess cash (dividends or buybacks).
I think the best solution for FLY to best realize shareholder value is to sell themselves to a bigger player. As was also alluded to on the CC, there are investors and JVs who want to get into this space. FLY is cheap (selling way less than book), has a great portfolio of planes, and there are a lot of beneficial synergies just given the lack of scale FLY currently has being the smallest publicly traded player in the market. But until then, wait and collect a nice 8% dividend that is very sustainable. Isnt the CEO like 70? It is getting close to selling the company and retiring.
#s were great, they have strong cashflow as an analyst alluded to. They are only paying out a small fraction of the cash flow in dividends. I think the market and analysts were really hoping they use excess cash to buyback shares as you could tell from the analysts' questions. They responded that they prefer to use the cash for growth initiatives, but I think the issue really is if they bought back shares now, it makes them look bad as they did a secondary last year. All in all though, no fundamental issues with the company, and growth remains strong going forward. It will be a matter of time when they use the excess cash to buyback shares if it gets too low. Maybe management wants extra shares on the market so that funds can buy more shares.
Growing fleet, big dividend, booming airline sector, low interest rates, all bode well for FLY. The stock is still down 20% this year despite the recent small run. If this can just get back to even for the year, I dont need it to be way up for the year like its peers, then Id be satisfied. No reason why FLY needs to be the only lessor way down for the year when the market is at all time highs.
Definitely moves in the right direction and interesting to note the sales were at above book values. Also, with additional capital from the announced $400 million debt offering coupled with the proceeds from the sales of the 8 757s, it does appear they are getting ready to ramp up new fleet growth.
Looks like the largest ship fuel supplier in the world filed for bankruptcy due to partially to fraud and other mismanagement of the firm. Banks arent loaning to them to continue their business, and we know how working capital intensive the fuel business can be. This should open up opportunities for ANW to capitalize on disruptions at OW Bunker I would think. Maybe ANW can even swoop in to buy selective assets to expand their presence in certain areas. Thoughts?
Right, this isnt as compelling of a value play if you factor in the heavy debt they have. Enterprise value is $800M+. With the tight liquidity situation, I don't see any reason to own them now at these prices. Even if they were to get bought out, there isnt compelling upside for equity holders given the debt that needs to be repaid. Now if they can pay down debt substantially, improve revenue as well as margins, then we could see some upside to the equity holders, but they still need to prove themselves capable of accomplishing that, which is at least a couple quarters away. Might be worth betting on Q2 2015 earnings in hopes things are turning, but cant see why BIOS would materially run now.
Agreed, and with interest expense on a $400-$500M debt balance, the interest expense is going to consume most of that EBITDA. This also means they dont have much room for capital expenditures without tapping more debt or in the worst case doing a dilutive equity raise.
And in a market at all time highs, I am finding it difficult to find a lot of good value plays. Hopefully I'm not wrong about FLY and it just really needs a catalyst for other investors to start getting excited again. As long as nothing is fundamentally damaged with the company, I dont see why we cant get a quick rebound. Most analyst targets are in the high teens to $20 price target range. With an 8% dividend, I think it might be worth to wait it out for this to move back up to the high teens in the coming months.
Judging by the performance of other lessors that reported, I think earnings call could be a catalyst for the stock to move higher.