Go Back  PPRuNe Forums > Aircrew Forums > Rotorheads
Reload this Page >

NEWS report - CHC Helicopter stock grounded

Rotorheads A haven for helicopter professionals to discuss the things that affect them

NEWS report - CHC Helicopter stock grounded

Old 7th May 2007, 03:56
  #1 (permalink)  
Thread Starter
 
Join Date: Jun 2006
Location: hot & wet
Posts: 13
Likes: 0
Received 0 Likes on 0 Posts
Unhappy NEWS report - CHC Helicopter stock grounded

CHC Helicopter stock grounded despite booming aerospace, energy sectors


ANGELA BARNES
From Friday's Globe and Mail
May 4, 2007 at 6:01 AM EDT

The aerospace sector is thriving, demand for oil and gas drilling remains high, but it is hard to tell from CHC Helicopter Corp.'s bottom line.
The helicopter fleet company, which bases about two-thirds of its business on the oil and gas industry, continues to disappoint the market, leaving its stock price in limbo for the past two years.
The stock has lost 4 per cent in the past two years on a total return basis, compared with a gain of 53 per cent for the S&P/TSX composite index and 64 per cent for the S&P/TSX energy index. The stock closed at $23.91 yesterday, down 2 per cent year to date.
The recent third quarter was more of the same.
"The company blames the shortfall in earnings on the cost of introducing new aircraft, although this argument is now wearing thin because CHC only introduced five aircraft in the quarter," Jacques Kavafian, an analyst at Research Capital Corp., said in a research note after the third quarter. In response, he cut his target to $24.50 from $28, while maintaining his "hold" recommendation. CHC had introduced 25 aircraft in the previous two quarters.
Scott Lamacraft, an analyst with Cormark Securities Inc., who rates CHC a "buy," said in his latest report that the company "needs to deliver higher margins and profits in the near term after posting disappointing financial results over the last several years." He cut his target to $28 from $35.
CHC made headlines a year ago after founder Craig Dobbin put the company up for sale but then halted talks with two private equity firms because they could not meet his price. The company remains public and is now run by a management team that includes Mr. Dobbin's son, Mark, who became chairman after his father's death last October.
It operates a fleet of about 250 aircraft, the bulk of which are helicopters of varying sizes. Revenue climbed to $300.8-million from $253.5-million in the three months ended Jan. 31, but profit slipped to $12.8-million from $21.5-million. At 28 cents, or 26 cents adjusted, share profit came in well short of the consensus 32 cents and even further off the 47 cents of a year earlier. Profit for the nine months also was sharply lower than a year earlier - at $30.5-million, down from $80-million.
The problem is margins. Mr. Lamacraft calculates that nine-month EBITDAR (earnings before interest, tax, depreciation, amortization and rent increases) increased to $170.1-million recently, from $158.6-million, but the margins decreased to 23.8 per cent from 24.3 per cent.
"Arguably, the best explanation is the longer-term nature of the company's contracts, typically three to five years in duration, a factor which tends to create a higher degree of inertia in financial results," Mr. Lamacraft said. Weather and aircraft availability are also cited as reasons for low margins.
While some analysts aren't that enthused with CHC, Martin Ferguson, lead manager of the GGOF Enterprise Fund, is clearly a fan. CHC shows up in the fund's top 10 holdings.
He likes CHC's positioning, noting that "it is a major player in an industry that is growing ... that is oligopolistic ... [and that has] high barriers to entry."
CHC is one of the two biggest players in that industry, he added, noting that it "has a huge fleet," which it has been increasing. An added plus is that most of CHC's fleet is under long-term contracts, he indicated. And over half of those contracts are based on fixed monthly payments.
Mr. Ferguson admits CHC's profit has "disappointed repeatedly over the last 2½ years," but said that beneath those numbers is a company that is expanding its fleet by "leaps and bounds."
The startup costs on the helicopters are taken before they begin producing revenue, which has hurt CHC's bottom line, he noted.
As his comments indicate, Mr. Ferguson looks beyond the near-term problems. Some analysts too are willing to do that, stressing the longer-term outlook for the company in arguing that the shares are a buy.
But the question is how much longer will they hold to that view if CHC continues to disappoint.
"With a strong macro environment and significant fleet growth, higher earnings should eventually materialize," Mr. Lamacraft said. "The stock is close to its 52-week low and adequately reflects the risk of ongoing near-term financial weakness."
Sundance76 is offline  
Old 8th May 2007, 13:39
  #2 (permalink)  
 
Join Date: May 2002
Location: Downeast
Age: 75
Posts: 18,267
Received 467 Likes on 191 Posts
Buy...Buy....Buy!
SASless is offline  
Old 9th May 2007, 05:38
  #3 (permalink)  
 
Join Date: May 2001
Location: UK
Posts: 312
Received 1 Like on 1 Post
Why ? Why? Why?
roundwego is offline  
Old 9th May 2007, 12:14
  #4 (permalink)  
 
Join Date: Jul 2001
Location: dunnunder
Posts: 129
Likes: 0
Received 0 Likes on 0 Posts
who cares? Fly, fly, fly!
w_ocker is offline  

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Thread Tools
Search this Thread

Contact Us - Archive - Advertising - Cookie Policy - Privacy Statement - Terms of Service

Copyright © 2024 MH Sub I, LLC dba Internet Brands. All rights reserved. Use of this site indicates your consent to the Terms of Use.