Aero Inventory Share Discussion Threads

[ydderf] 14/2/2009 05:00

If AI. are prepared to issue their equity at 250p and forgo a 20% return on their stock liquidation, I wouldn't like to bet on the divi being held. The projected annual divi dend will cost £10.4 million (52.4 million shares now in issue x 20p), approximately the same sum as they have raised from the share placing.

What sense is there in selling shares at a p/e of 3 (earnings yield 33%!) and then paying out the whole of the proceeds of the placing as a dividend?

My conviction is that there may be a cash flow problem, and even if it is caused by 'expansion', it is still a problem.

Until the company properly explains, why buy the shares?

[rat attack] 12/2/2009 10:08

Yes spread is very wide. Looking to pick some more up, but was watching banking sector (which appears to be coming back to life) so missed the 245! Not biting at this spread though...especially when Dow futures off 80!

[robsy2] 12/2/2009 09:42

102m US$ this year less 30% tax = 71 m US $, new eps is approx 1.3 US $ which is about 91p. I managed to get some more this morning at 256p. Very wide spread 252.25- 269.75 on my screen , not many sellers about ?

[rat attack] 12/2/2009 08:43

SP under pressure today - down 8.5% ahead of new issue!

[mdj8] 11/2/2009 19:48

Just my musings but I would imagine there's some mutual back scratching going on here. Perhaps the bills are being sold to members of the loan syndicate - that would make them happy and favourably disposed towards AI.. Also with Lansdowne holding 20% of the company (once they receive their additional 10%) I feel it would be most unlikely that anyone would bet against AI.. Without a large holding it would surely be very tempting for a serial shorter like Lansdowne (NRK, BARC) to not take a pop at AI if the share price trajectory were to be straight up to £10-. I generally think Rupert and his boys are continuing to ensure when this stock does fly, there's little to hold it back before it hits £15-. Thats what I'm hoping anyway.

[sleveen] 11/2/2009 17:54

They might be come the next big contract :-)

[woracle] 11/2/2009 17:40

Yes 20% for 1 year is obscene. Also if they now have $150-200M left to play with, what the hell are they doing a 10% dilution for ? for a poxy $15M net.. Are they THAT tight on cash ?

[muangsing] 11/2/2009 17:33

MDJB

Thanks

I posted my 1234 before your 1233 appeared lol

reading 1233 however says " a significant quantity of consumable aircraft parts"
I still can't find any reference as to what they are valued at in Aero 's books.

Regards

[muangsing] 11/2/2009 17:27

Thanks MDJB

Converting 100 into 80 seems a BIG discount !!!!!!!

Still don't know what Aero were carrying the stock at though?

[mdj8] 11/2/2009 17:26

Muangsing - seems the bills will be discounted by 20% (FT above) and the cost of carrying the stock is not material - this article....

From Flight Global
DATE:10/02/09
SOURCE:Air Transport Intelligence
Air Canada buys $100m in parts from Aero Inventory
By Brendan Sobie

UK-based aerospace parts specialist Aero Inventory has sold almost $100 million worth of aircraft parts to Air Canada.

Aero Inventory says in a statement today that it has received "bills of exchange with a face value of approximately $100 million" from Air Canada in exchange for "a significant quantity of consumable aircraft parts".

The bills do not mature until early 2010 but Aero Inventory says it "intends to discount the bills for cash to provide additional liquidity to facilitate new business".

Aero Inventory finance director Hugh Bevan tells ATI the deal with Air Canada will help it achieve its earlier stated objective of reducing its inventory and increasing its cash flow.

As of the end of June 2008, Aero Inventory held stock worth $690 million. Bevan says additional sales could be completed as the company looks to further reduce its stock level while maintaining its existing level of business to customers.

Bevan says the Air Canada deal covers parts which will not have to be moved. The parts are now stored at an Aveos facility and will simply change ownership.

Aero Inventory in November 2007 signed a 10-year contract with Aveos, then known as ACTS, covering the provision of consumable aircraft parts. Aveos uses the parts to maintain aircraft operated by Air Canada and other carriers. ACTS is a former subsidiary of Air Canada parent ACE Holdings.

Bevan says Aero Inventory is seeking to reduce its inventory and increase its cash flow to allow it to invest in new business.

[mdj8] 11/2/2009 17:20

Aero Inventory placing raises £11.9m
By David Blackwell

Published: February 10 2009 16:20 | Last updated: February 10 2009 16:20

Aero Inventory, the Aim-listed wholesaler of aircraft parts, said it has sold "a significant quantity of consumable aircraft parts to Air Canada" and raised £11.9m before expenses through a placing.

The consideration for the parts is in the form of bills of exchange with a face value of $100m. Aero Inventory plans to discount the bills for cash, generating additional liquidity to win new business. Numis, its broker, estimates the sale of the bills will realise $80m net in cash.

"We have talked about de-stocking before," said Hugh Bevan, finance director, "but this is the first major step. It will give us headroom to take on new business." Mr Bevan added that outsourcing of parts supply made sense for airlines that are looking to cut costs in every way possible.

The shares, which are being placed at 250p each, closed on Tuesday up 17¼p at 294p.

The company described demand from existing contracts as "resilient, although it would be unrealistic to expect it to remain entirely unaffected by the global economic slowdown."

Nevertheless trading was in line with expectations, and the company was seeing "unprecedented new business opportunities, with progress being made in a number of new contract negotiations, in particular with one major airline."

The company will report its interim results next month. Numis is forecasting pre-tax profits to rise from £73.1m to £102m for the year to June.


Copyright The Financial Times Limited 2009

[muangsing] 11/2/2009 16:14

Beaufort

It is not a rights issue. In a rights issue existing shareholders do not get diluted. Here existing shareholders do get diluted.

Also if they are raising $100 mill dollars for a carrying value of $100 mill dollars in stock., ie NOT selling at a loss, does this $10mill dollar approx share issue make a big difference. ?

I do find if curious that in the announcement they do not state the carrying value of the stock they have sold. I'm sure if it was at a profit they would have said so.

[beaufort1] 11/2/2009 16:05

Given that most current rights issues in the market are discounted to 40% AI getting theirs away at 250p is pretty darn good. It shows it is not a distress issue.

[robsy2] 11/2/2009 16:04

Ok so that could explain the weakness in the share price If it goes back 10% from 290p we are about there.Like you say that has to be contrasted with the positive news of the contract and the likely rise in share price that should follow.In the short term they will have 110m US$ more cash in the bank, if that can be used to raise turnover by say 150m a year then the balance is very positive.My nerves would favour both things being announced on Friday preferably before the market opens!

[muangsing] 11/2/2009 15:39

I would like to know what the carrying value of the stock is that they are selling for $100 mill dollars.

I would also like to know the discount applied to the bill.

If it is such a great deal I don't understand why they have to issue shares at an approx 10% discount to the prevailing share price.

Any thoughts or greater knowledge much appreciated.

Regards

[jr hartley] 11/2/2009 15:30

Should we not expect a 10% drop in the current shareprice on Friday when the 10% new shares are issued on Friday? Possibly some selling today at 270p plus with the intention of buying back on Friday at 240-250p. A potential snag with this strategy is if they announce the new contract on the same day as the dilution leading to an upward spike (hopefully!). In any case the iminent new contract should provide a much needed lift.

[robsy2] 11/2/2009 15:12

Sorry but picking up on RA's post where house brokers Numis say;

"We continue to see positive earnings momentum with growth from new potential business far outweighing any macro-led volume decline," commented broker Numis, which has a 'buy' stance for the shares.

that means 08/09 is in the bag and so is 09/10 as well, once then new contract/ s are announced.With interest rates this low and GBP this weak + incremental earnings on new contracts being higher we are looking at a serious uplift in earnings and a generous dividend.A widely predicted 24p dividend this year gives a yield of 8% covered 3 to 4 times.....

[robsy2] 11/2/2009 15:04

Yes bizarre. I am surprised by the (lack of) reaction as well.

[nfs] 11/2/2009 11:21

surprised the share price hasn't flickered much-the ability(prior to any new contract) to ease debt surely a boost and the fact that its a strong indicator of a new contract and the largest shareholder is in for more is all positive too

[rat attack] 11/2/2009 07:59

Shares in aeroplane parts supplier Aero Inventory (AI.) jumped 16.25p to 293p late in the day's trading as the company announced it is raising cash by selling 100 dollars worth of parts to Air Canada alongside a placing of 4.76 million shares to raise 11.9 million pounds. Among the shareholders participating is Lansdowne Partners, one of Aero's largest shareholders. Aero also said that current trading is in line with management expectations and demand from existing contracts continues to be resilient although it would be unrealistic to expect it to remain entirely unaffected by the global economic slowdown. It added that progress is being made in a number of new contract negotiations, in particular with one major airline. "We continue to see positive earnings momentum with growth from new potential business far outweighing any macro-led volume decline," commented broker Numis, which has a 'buy' stance for the shares.

[rat attack] 10/2/2009 21:15

Any dividend cut would send the price crashing a further 25% in this market. I take it the new shares issued do not have any entitlement to the next dividend?

[milacs] 10/2/2009 18:02

Wonder if AI will omit the dividend to help facillitate a new contract?

M

[beaufort1] 10/2/2009 17:34

MDJ8 - great call - join the Board immediately!

[mdj8] 10/2/2009 17:07

Robsy, I must be psychic, that or Ruperts reading this board see 1031...