Aero Inventory Share Discussion Threads

[rat attack] 10/10/2008 09:09

I dont believe this share - everything is a sea of red and this is the only blue spot!!

[simonrk] 10/10/2008 09:07

Seems to me nothing much has changed for AI. this morning despite a massive fall in the FTSE.

I keep expecting the end of the fall in the markets just so we can return to reason, but its just not coming. Its going to clean out a lot of people this crisis, but that's what it is supposed to do.

[bergster56] 09/10/2008 22:40

another big fall today? the knife's falling further

[robsy2] 09/10/2008 15:59

As for being categorised as an IT company, this impresses me too. Productivity in the economy generally has improved because of improvements in this area since the mid to late 80's especially. But its application is key. AI. seem to be using it to gain an economic advantage for its customers and itself. The problem is that it becomes obsolete as other better products come in to use. Hopefully, their entrepreneurial skills are utilised to ensure the system is improving.
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My info is that they have their own system which they believe is a big asset to them.Having it in house means that they can develop it piecemeal,cheaply and mae it do exactly what they want it to do without being held to ransom by outsiders.
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Also, I want to see if Lewin can concoct a plan for taking on the customer's stock that does not raise debt inordinately. Imagine if he were able to announce a major contract that did not raise debt levels, what would happen to the share price then? Now that would be clever.
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This has been mentioned as being the way forward. I know little about all this, but it seems there is an opportunity for AI. to convince their various suppliers of the benefits of storing their products in Ai's warehouses for free and getting paid for them when AI, sell them on.That could be neat especially if there are competing manufactureres of interchangable products. The more enlightened may see the benefits of entering into such agreements as a way of gaining a competitive advanatage over other widget manufacturers.

[mdj8] 09/10/2008 15:11

My feelings were that the magic GBP15- should have been a way point - rewarded with a decent sum but with more reward available at say GBP20-. As you pointed out would Lewin stay after GBP15- ? what about the rest of the management team/staff.

[simonrk] 09/10/2008 14:58

As a life-long libertarian I have had some problems with this too. Problem is, without the bailout, we're all in the brown stuff. Its a case of holding your nose and going along with it I guess.

I was reading elsewhere a trader whom I respect saying the UK bailout is much better than the US version because it is putting up more money and instead of killing (Lehman Bros) or outright nationalising (AIG) it is offering to buy shares and anything the bank has and encouraging others to do the same.

Frankly I don't (yet) see all this as a cynical grab by socialists to increase their ownership of the means of production. That's not to say I like it though. As you say, slightly off topic.

Interesting what you say above about MRO's. I assume they are less profitable over the life of the contract than airline companies? Not that this matters too much as any profit added is good. However, I think what Lewin wants is market share and future profits. Do you think he will want to stay once he has reached the magic £15 or stay and move it up further?

[mdj8] 09/10/2008 14:26

Bit off topic but good...

[mdj8] 09/10/2008 14:13

Yes it would be clever - like turning lead to gold. I would imagine the most attractive benefit an airline sees is the wad of cash they get in return for their stock of inventory with the ongoing savings and efficiencies being rather further down the list of benefits.

That means to get value from lead, AI would be better to focus on new contracts with MRO compmpanies a la Haeco, ACTS and SRS Technologies. For them, inventory control/management and consequent efficiencies are rather higher on their list as cash is not so important given the nature of their business. With MRO Cos, AI could instead purchase stock as it is used, gradually replacing it with their own as it is consumed.

[simonrk] 09/10/2008 13:38

I am impressed with the fact that he left the merchant banking business to buy a nuts and bolts company (literally) in order to move into this area. He seems to have had a longterm vision and has executed his plan admirably so far.

As for being categorised as an IT company, this impresses me too. Productivity in the economy generally has improved because of improvements in this area since the mid to late 80's especially. But its application is key. AI. seem to be using it to gain an economic advantage for its customers and itself. The problem is that it becomes obsolete as other better products come in to use. Hopefully, their entrepreneurial skills are utilised to ensure the system is improving.

Also, I want to see if Lewin can concoct a plan for taking on the customer's stock that does not raise debt inordinately. Imagine if he were able to announce a major contract that did not raise debt levels, what would happen to the share price then? Now that would be clever.

[mdj8] 09/10/2008 13:00

SimonRK, it was your penultimate sentence that I felt favoured the banks bonus schemes:

"It is interesting that the present gov scheme to help banks removes these incentives for bank executives (bonuses) and yet expects them to produce miracles far beyond what we expect from AI.s mngmt."

Anyway we are in agreement and from what I know of Rupert, ex Flemings Hong Kong, I am very happy with his entrepreneurial drive, inventiveness and ability to deliver solid performance. AI. have found a market niche where they can really add value. Interestingly Bloomberg categorises them as a "software" company - putting them against the likes of SAP, Siebel, Oracle etc. Fortunately They seem to cover both the "supplier" category and the "software" one which is ultimately why I feel they have no direct competitors. I must say, initially I felt the bonus scheme AI. put together for themselves was too rich and not long term enough. In light of the current influences which are completely outside of AI.'s control, I may have to rethink my position on that.

[simonrk] 09/10/2008 11:55

MDJ8, my point is not to justify bankers' bonuses, but to highlight the virtues of AI.s reward scheme.

Myriad factors will affect the future share price of AI. Those discussed above (cash flow, debt costs, the aero economy, the busplan and the market) are important and need to be discussed and monitored. I merely wish to introduce another into the equation, the entrepreneurial deftness of the management. TA (maybe), balance sheet comparisons and earnings reviews are undoubtedly essential when assessing share price potential, but to my mind the relative capability of the managers matters too. If anybody has information on this subject I am interested to read it.

Warren Buffet's recent decision to invest in Goldman Sachs and GE was heavily based on his assessment of the management teams in these two companies. He knew them well and decided to go ahead in the face of relatively poor recent results and a bear sentiment in the market. He has the advantage of knowing them personally, but I don't know Lewin & Co.

[mdj8] 09/10/2008 11:03

Martpow, we have looked at the impact of funding - see a few posts ago. Of course you could easily get the calculator out. SimonRK, there is a huge difference between AI. directors incentives and those of the bankers. AI. people must ensure their business is viable and long term to get their reward, the bankers didn't need to do that - they were paid from year to year and their cash comp as well as being unnecessarily huge usually far in excess than their stock options. This encouraged risk. They basically built huge unviable businesses and got paid along the way until those businesses collapsed. The bankers however kept their annual rewards, whilst had the AI. guys done the same their reward would have disappeared.

These bankers were greedy sh*ts and basically enriched themselves whilst socialising the downside risk - hence they have kept their multimillion pound bonuses of last year, the year before etc etc whilst the banks shareholders and indeed anyone who had exposure to equities is now worth a lot less than they were.

[simonrk] 09/10/2008 09:52

Good post Robsy2, I'm with you.
As for Libor being a med to long term risk, the actions of the govs and central banks recently has been targeted at getting this down and they probably will. If they don't, invest in caves because that's where we'll be moving.
Lewin & Co will need to be clever about how they finance the new contracts, as the old model of increasing AI.'s debt to release customer cash assumed continued cheap credit. This scenario has obviously changed but the need for customers to release capital and reduce cost has not. In fact, it has increased hence the potential for solid growth for AI. What is required is for Lewin to come up with ingenius methods for adding customers in this new environment. Both parties have a need to find solutions and that is a good thing.
Part of the risk in this stock is the management's entrepreneurial skill. So far they have done well. They have an enormous incentives to find these solutions, and if they do they will be justly rewarded and we can all put downpayments on larger caves.
It is interesting that the present gov scheme to help banks removes these incentives for bank executives (bonuses) and yet expects them to produce miracles far beyond what we expect from AI.s mngmt. I know where my bet is placed.

[martpow] 09/10/2008 09:31

It is clear, as we know, that the probably concerns effecting the share price is the high borrowing levels. Has anyone evaluated how much current Libor rates would add to the costs. A quick calc suggest to me a maxm of £10m but will be much less balanced over the full year Libor rate(by as much as 50% or more ???). Also the loan is a 5 year deal and will see out the current lending crisis.

If I am right ??? does the above create a problem for a growth company. We need some good news from AI and the good fundamentals will then be revisited by the market and turn this arround.

[sleveen] 09/10/2008 08:05

Bergster

Take a look at UMC MGGT to compare share price movements... notice any similarities?

[jr hartley] 09/10/2008 07:57

berkster56 - why post on here if you've nothing to contribute?
You've probably not noticed but the whole market's been in freefall for weeks.

[hammy_davies_snr] 09/10/2008 00:28

That's grand.

[bergster56] 08/10/2008 22:55

Why do people insist on convincing themselves that a share (in this caseAI) is a good solid investment when all the pointers on the dial indicate 'under threat'. This one has lost 30% of its value in a couple of weeks! That's not simply market turbulence!!!!

[robsy2] 08/10/2008 18:51

"The question is, how many of us will sell if it returns to 600? 700? 1000?. Remember, the plan is 1500. Seems a long way off....."

Doesn't it just! It really is extraordinary to think that we had a buyer sniffing around here at a rumoured bid price north of 750p !! but that was way back in July 08.

The results were fine , the World will continue. I was sat watching my son playing football last Sat and noticed that there are always at least one plane visible above my local airport, ( game was a bit dull ended up nil nil)and that never used to be the case. I mean the volume of planes not the lack of goals!

Its the same everywhere but I mean everywhere I go, new terminals. more flights etc etc.

My youngest son was 12 in 2006 a year in which he flew 32 times, I remember we worked it out because when I was that age I flew for the first time , the next time I flew was about 7 years after that....

The credit crunch will pass, people will continue to fly but in the meantime the share price here seems to price in inminent failure.

If they had a line of credit that needed renewing next summer or some debt issues that needed redeeming soon then I could see the worry but that is not the case.

True finance costs are sharply up but this should be temporary and is I feel more than reflected in the share price

If there was something absolutely horrible happening then the share price would probably be a lot lower than it is. I mean it pretty well tracks the AIM indexes but thas probably another subject.

I know its tempting fate to say it but operationally there is not a lot that can go wrong really, thats one of the reasons why I like this company, it is easy to understand and will become hugely cash generative as it gains momentum.The capital requiremnets needed to expand the business is the only fly in the ointment at the moment and I can see an end to that.

If this isn't in some sort terminal nosedive and things chug along as predicted,by the directors only last month . ie fantastic opportunities/ unprecedented levels of new biz expected, then a couple of hundred pence back on the share price is a given and pretty quickly.

That would get us back to where we were post final results, a whole month ago.Wow! A positive trading statement, or a big new contract, would take us back to where we were at bid time last summer.It all looks pretty do-able.

I mean if they do 75p in ye 2009 surely they can expect a rating of PER10. If they can see slower further expansion of say 33% on 2010, with a positive looking forward statement then they could get rerated to PER15 and hey presto everybody is laughing, especially the patient institutional shareholders who are probably looking at their holdings and having checked with Rupert and Co at HQ are probably thinking along the following lines ...."we'd better keep this one because at least with AI, I can see a clear future, we discussed it when we approved the share package and all seems to be OK and anyway if I do sell out that will be difficult to defend and if it recovers then I will have made a big mistake and it would be very difficult to get back in again. So I'll sit tight and see what happens because i can see £15 but what the hell if they only get half way there I'm still winning....."

The trading volume today is encouraging.There are many reasons to sell a share but really only one reason to take a long position. Someone picked up the stock with relatively little impact on the share price and that someone would not shell out that sort of money in this sort of market without a good deal of confidence.
Hmm Interesting methinks. Oh and it pays a pretty good divi as well.

[sleveen] 08/10/2008 18:02

Amen to that MDJ8 and great analysis from all.

Agree some trading between market makers see 2*250,000 trades after hours.

I picked this from the JRVS thread (thanks dealy) re a general liquidity perspective... I think it may well provide some understanding of what's happening here (and elswhere eg CHLD):

Guy Monson from Sarasin (who manages about $6 billion in equities) just described the problem as follows: equities are the only liquid assets at present (bonds, real estate, private equity, commercial paper all currently totally illiquid) so cash raising occurs via the sale of listed equities.

This is occuring irrespective of the value.

Strong hands can buy incredible bargains in such an environment. And if all the companies truly are doomed then we are all truly doomed anyway so it doesn't matter.

PS I'm still holding AI bought at 450p+. IMHO we are(i hope) near the bottom.

GL all

[mdj8] 08/10/2008 14:23

Same here. Perhaps once the banks are stable, investors will be somewhat wary of just how much they will recover to their heady prices of old a) due to dilution of equity as a result of Govt investment and b) the complete disappearance of packaged credit derivatives that the previous share price growth was based on. Ideally the savvy punter will then invest in proper businesses like AI. for which a pe of say 15 to 20 should be reasonable. Anyway fingers crossed.

[simonrk] 08/10/2008 13:41

OK, but the volume is still higher recently. Me, I would like to see the ratio of buyers to sellers tip in the direction of the former, and of course, with a higher volume than we've seen in the past. My feeling is that once market sentiment changes from its present malaise, this will happen because the fundementals (busplan, management, growth potential and balance sheet) are v good. That's why I own it I guess.

[mdj8] 08/10/2008 13:26

Simon, re liquidity - 10.50ish today 5 trades amounted to 1,987,000- shares. These were most likely an off-market transaction between institutions, reported after the fact. This happens once in a blue moon and is not the type of liquidity I am talking about. If that size were executed on the market we would likely be below GBP2- now. I would like to see a situation whereby selling or buying 10,000- AI. shares is not even noticed rather than being very likely to move the market as at present.

[simonrk] 08/10/2008 13:23

Thanks, I took it from the figures posted above above. Anything below 5 rings a bell for me. Problem is, what does the bell mean?