Aero Inventory Share Discussion Threads

[robsy2] 06/11/2008 17:17

Negative cash flow is quite common in a superfast growing business like this.It is a expense, it is not a problem. I am sure they will keep the dividend but they seem to have started to reduce the payout ratio which makes sense as well.They can afford to,at todays exchange rates last years 102cents /52p is now worth 63p of which they paid out 18p dividends last year which at currrent share price of 275p makes a dividend yield of 6.5% covered 3 times, generous.Too generous ? Dunno.

[russianlinesman] 06/11/2008 17:07

darlocst

how many new contracts are they going to win by saving the dividend money? Did you see how much inventory they bought with previous contract wins?

'meaningfully expand their business' with their dividend payments - yep £10m a year in new contracts, that's really meaningful.

[johnrxx99] 06/11/2008 14:02

Surely divi is irrelavent to cv growth. But cashflow is not negative.

[darlocst] 06/11/2008 13:46

But if they can't expand their debt factility and their cashflow is negative (both true as of now imo) why should they pay money out to their shareholders when it could be more profitably used to pay down debt & allow further contracts to be taken on within the existing debt facility?

I don't think an investment in AI. should be made on the basis of the dividend. They should cut / cancel it until they turn cashflow positive and have enough debt headroom to meaningfully expand their business.

[russianlinesman] 06/11/2008 12:46

yield yield yield

Interest rates down to 3%, and maybe more to come next year.

For AI to yield a mere 3%, share price would at least double. Dividend cover well over 3x

[robsy2] 06/11/2008 08:56

Volvo
You thinking of going?

[mdj8] 05/11/2008 17:22

Yes, thanks YF

[mdj8] 05/11/2008 17:22

In a previous msg Robsy2 says AGM 24th Nov.

[volvo] 05/11/2008 16:29

Anyone got a date for AGM this month?

[yf23_1] 04/11/2008 19:10

Well, I am not surprised we are now encountering a little consolidation after yesterdays shooting star type candle. Candle pattern now is also similar to a bearish advance block.
This pause coincides with the share price at high volume days towards the start of October so may just prove to be a technical aspect of he advance.
However, we are now above the 21 day ma so if we can remain above this, the momentum is still to the upside.

[ydderf] 04/11/2008 17:16

I have only two words to say about this share AT 270p:


YUM




&




YUM

[robsy2] 04/11/2008 14:56

And the cost of borrowing in US $ is tumbling, 3month Libor US $ rates now 2.86% , high for the month was 4.82% so that has corrected quickly.
Good point about landing slots ,as you say it is total number of aircraft flying that matters.On that subject In June 08 Qantas operated 224 planes, up from 213 a year earlier.
In terms of business Haeco now has two more subsidiaries that use AI. they add a hanger every 18 months and are expanding rapidly.ACTS have very ambitious expansion plans and the right to buy stock in AI. at 580p , if I remember correctly, if and only if they give ai. 250m US $ a year of business within the next 3 years.I think they did 140m in Year 1.
The big picture is that they are not struggling for business or new clients, the commercial aircraft fleet is expecting 4% a year Compound annual growth rates over the next 9 years and even if it was static they have still only scratched the surface of the marketplace.

[mdj8] 04/11/2008 12:19

Robsy, I also bought some more this morning at GBP2.78. I was encouraged by the director buys around GBP2- and happy to note they bought in reasonable size, enough to hurt a little if lost. I did wait however for some sort of a trend to reinforce an apparent turn around. Too much catching of falling knives has left me with only a couple of fingers so I want to keep those. Indeed I was only explaining to the wife how this business is one of those that should somewhat shielded from lower consumer spending - as you mention we only have 3% of the available market, and the airlines must keep aircraft flying full or empty, to keep their landing slots (in the UK and US at least). Servicing/parts demand should therefore only change if airlines actually close their business, for which the first to go would likely be european due to the fine margins/govt subsidies. Fortunately we have little exposure in Europe.

I also felt better after looking at the excercise price of the Directors options in the Annual Report. If we go lower, I'll be buying more.

P.S. forgot to mention the cost of fuel going down too, so aircraft operators viability has improved of late.

[robsy2] 04/11/2008 11:19

This is what was said about the company back in September when they announced the results


"Aircraft parts distributor Aero Inventory's results came in slightly ahead of expectations. Cazenove, its broker, increased its forecast for 2008-09 by $5m to $90m. That leaves the prospective multiple at below 7. The undemanding rating points to a lack of understanding of the business. Financing the necessary stock levels is costly, but if the group loses a contract it will always be able to sell its aircraft parts. And whatever troubles lie ahead for the airline industry, Aero estimates it has only 3% of its potential market says the FT.

Assuming that Aero's increasing cash generation will obviate the need for a rights issue, the shares – at 440p, or less than six times earnings, and half the level of June's indicative (albeit withdrawn) offer from Bridgepoint – are worth hanging on to, adds the Times."
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I am looking for guidance at the AGM about current trading so any predictions up till then are speculative. I have no idea if they will make the 90m US $ or even if the forecast is still valid . Actually not even sure if " Valid " is a good adjective to use when you discuss prospective earnings forcasts issued by companys brokers, but I have added again this morning.
Having seen my losses mount on the way down , I'm determined to claw some of it back on the way up!
So putting aside the 90million which is EPS of around 1.25 US or 80p, If they can do just 65-75p a share in 2008/9, ie more or less the same as last year then we have a propective PE of 4 with a prospective dividend of 7% at 300p. To do this doesn't seem like a big ask.
With an ex rate around 1.60 I reckon they could probably do that from the existing client base, .Any new biz would be a bonus.
I have had a good look around the market place recently and in terms of current and propective PER and dividends I haven't seen anything that looks cheaper or more solid.
The worry over finance costs is diminishing , I don't see a rights issue because the existing financing structure is open ended. Fuel costs are falling but the oil price shock will lead to the restructuring of the airline industry and will drive more business into our hands. The nature of the contracts give tremendous solidity to the income which underpins the earnings.
The airline recession will be good for AI. , we just haven't seen that part unfold as yet , but it is clearly signposted.
Last summer after the failed bid at( 900p?) the share price fell back to 500p and I was shocked, then 400p aghast , 300p ashen faced, 200p really seriously worried. The director buys at 180p were the signal to me that all is well.
And now here we are at sub 300p. I 'm hopeful for 450p before the year end.
Imagine it being revalued to 450p by Xmas and it still being less than half the value of a rejected bid of 6 months earlier.
To get to the "Holy Grail" they will need to get turnover up to 1 billion US by year end 2010. This would give them EPS of around 2 US $ which would probably be enough to get them their bonuses.It is not impossible by sept 2010 but they will need some big new contracts coming on line pdq and the City needs to understand the company better, as the FT said.

The undemanding rating points to a lack of understanding of the business. Financing the necessary stock levels is costly, but if the group loses a contract it will always be able to sell its aircraft parts. And whatever troubles lie ahead for the airline industry, Aero estimates it has only 3% of its potential market says the FT.
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I do see turnover at 1billion US $ and beyond as being absolutely inevitable, so there is plenty of value here for long-term holders like myself and possibly short term ones as well.

[sleveen] 03/11/2008 10:22

AI annual report now available on website...its makes for good reading.

Seems to me that AI can pick and choose who it does business with ie only the stronger airlines etc, which makes me optomistic about the share price

[sleveen] 31/10/2008 17:39

DW or should that be Bogster?
As I said in an earlier post: Air Traffic Control (ATC) has given permission for take off.

Sorry to be a bit cryptic but as it was on your radar I thought you might have understood. LOL

[davidwilkin] 31/10/2008 17:19

my 160 looks a tad optomistic now.......oh well plenty more buses to catch. i shall wait with some funds for this though and hope to buy on weakness.

[robsy2] 31/10/2008 15:24

good week for us and the agm is confirmed for 24th Nov so we should get an update then. I'm hoping for good news.
Just been rereading the Annual accounts, as you do, and noticed how their gross margins have held up , in fact improved over the years.
They talk about how they are getting the critical mass to get more business, and improve margins as well as build sig barriers to entry for competition.
Made me have a look at the EPS v number of employees.
EPS 2004- 10.4 cents, EPS 2008- 101cents ie ten times higher.compare that to
No. employees 2004- 101, number employees 2008- 297 ie three times higher.
Pretty amazing.

[robsy2] 30/10/2008 15:18

More directors buys. Good stuff! Interbank rates coming down as well so thats positive.

[yf23_1] 29/10/2008 14:03

only maximoney1 can do it
is he still posting ?

[yf23_1] 29/10/2008 14:02

..and RSI oversold at 20.
I'm not up with MACD, are we supposed to wait for a crossover ?