Aero Inventory Share Discussion Threads

[mdj8] 23/3/2009 19:36

Very intersting Mr Linesman, thanks. New contracts over the last three years have been Qantas, ACTS, and ANA. ACTS, now called Aveos - is independent of Air Canada and according to Mr Linesmans link are used only for their MRO operation, whilst Air Canada manages it's own inventory (CAN$500-mill with 250 staff). However also from the article about Air Canada;

"The carrier also expects the contract it recently signed with Aero Inventory for expendable materials to yield returns. "They'll be our single-source provider for expendables," says Mazuroski. "This reduces the need to have a large procurement department inside your airline." Performance guarantees more than outweigh the catalog price per unit. Plus, it is not necessary to own the inventory and "you won't have to pay for it until you use it." Depending on the contract, the company may even credit an airline back if it stores the inventory inside its facilities".

I can't find the details of this contract, only the ACTS one. I wonder if this really was a contract or perhaps a letter of intent that was walked away from.... and which was announced very recently.

What do you guys think?

[russianlinesman] 23/3/2009 18:19

Article on Air Canada & inventory management incl Aero

[jr hartley] 23/3/2009 14:50

We need evidence that they can closely match purchasing with sales long term. Their profitability is based on the purchase price of the parts that they sell but so far they are purchasing far more than they sell. With the directors now fully focussed on matching purchasing with sales rather than chasing new business, time will tell if they can deliver on this. I'm sticking with them and will look closely at the year end accounts for evidence of improvement in this area during H2 08/09. If they can deliver on this, I don't think it'll be long before the price soars. If not then we're struggling.

[simonrk] 23/3/2009 14:40

Apologies for the mis-read by me Ratty.

Not sure where the up-side pressure on share price is coming from though, without new announcement. The fundementals are strong but nobody seems to care.

[rat attack] 23/3/2009 14:00

daihardtoo - I do like the comment about 70% asset backing when the share price was significantly higher than today! Talk about shooting yourself in the foot, certainly a man of contradictions. Sour grapes as you say.

[mdj8] 23/3/2009 12:54

Thanks RA.

[mdj8] 23/3/2009 12:30

Sorry RA, nice to know you're long, must have missed the quotation marks... So Mr EK is making self serving comments then... where are his quotes and can we counter them? i.e. like on a forum or something, because they seem to be just plain wrong. I hope he is already very short because he'll have to buy at some point and with UBS having already dumped much of their stake I doubt there are many who will sell to him at these levels.

[mdj8] 23/3/2009 10:59

Thanks JR. RA - the dash for cash was needed to purchase stock from their prospective "major contract" if it went ahead. It didn't, and as a result the cash that was to be raised from discounting the bills of exchange (from selling inventory to Air Canada) is no longer urgently needed. AI. are therefore holding on until the Bills expiry so that they receive a full $100-mill instead of discounting them and receiving $80-mill now. As for the share placing - that could hardly be reversed, could it? AI. has not yet fully integrated ACTS with their systems and to take on another major contract now would be a significant stretch - if the commercial terms being offered were also not compelling, then I think they were right to walk away. Further, do you not think Lansdowne did their due diligence before increasing their stake to 16% odd? I can't see exactly what is fishy here, apart from the apparent complacency of so many significant holders. This stock is simply too illiquid for anyone to short it in size - even 10,000 shares moves the market for goodness sake - shorting large amounts would be very dangerous if only because the stock is so difficult to buy or sell in large amounts. All IMHO of course.

[simonrk] 23/3/2009 10:49

Go ahead Ratty, I'll stay long.

[rat attack] 23/3/2009 09:59

JR - Evil comment: Aero Inventory (AI.) shares are off 10p on its results statement. There is something fishy here. Earnings are declared to have rocketed but there is a profits warning in that the management are, despite paying a 6p dividend, dashing for cash. Stocks and debtors have rocketed and a major contract in prospect has been dropped. All most mysterious. Sell and keep selling at 190p is what I say as this one is heading to two figures sharpish.

[jr hartley] 23/3/2009 09:29

EN (Evil Knievel) is Simon Caukwell serial shorter who I take it is shorting Aero. Can anyone post any EN comments relating to specifically why he is shoting Aero?

[mdj8] 23/3/2009 09:21

RA, who/what is EN pls?

[rat attack] 23/3/2009 08:26

I would doubt it with EN's comments around!

[adbast] 23/3/2009 03:02

Scotland on Sunday: 22nd March 2009 - "Frank Turner, a non-executive director at logistics group Aero Inventory, has upped his family's stake with the purchase of 28,000 shares at 175p."
That should steady some wobbly nerves!

[mdj8] 20/3/2009 10:46

Yep, as I said - Catch 22. Interesting RNS showing UBS holding is now below the reportable threshold - perhaps it's them that have put the pressure on the price of late....

[sleveen] 20/3/2009 08:06

I have a lot of respect for JB he sums up the AI situation nicely...damned if you do damned if you don't.

slev

[mdj8] 19/3/2009 22:30

I think we're all in agreement here....

Aero Inventory is being used as an example of why……230;

'The market is as cheap as in 1953'

When the market turns it will be one of the most stunning bull markets any of us has experienced.

By James Bartholomew




Last Updated: 3:03PM GMT 19 Mar 2009

These are truly extraordinary times. Share prices of many smaller companies are almost unbelievably low. I was once told by an editor never to use the word "cheap" and he had good reason. You can say something looks "cheap" today and look pretty silly when it is even cheaper tomorrow. But really these times make it very difficult not to employ the "c" word.

There is no pleasing the market. On Monday, two of the companies in which I have serious stakes – worth more than 7pc of my portfolio – announced results. Aero Inventory, which manages aircraft parts for airlines, produced excellent profits – up by nearly half. How did the shares respond? They fell 17pc.

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Yes, there were one or two reasons for the fall. Above the rest, the company said it had not been able to agree terms for a new contract with a major airline. That was a disappointment. But the irony is in the past six months or so, I have been told that the share price has been weak because of fear of overexpansion leading to a need for capital-raising. So, one minute the company is distrusted because it is expanding too fast, the next it is spurned for not expanding quickly enough. Damned if you do, damned if you don't.

The other company that reported on Monday is safe and exciting. Healthcare Locums, an agency for health and social workers, still slumped 6pc on Tuesday morning.

Sometimes the market seems moody. Shares can rise or fall 20pc with no apparent cause. I wonder if it can be occasionally a single, relatively modest buyer or seller who moves the market a great deal because the turnover in shares has fallen so low. Some of my shares, REA Holdings for example, can easily go through a day without a share being bought or sold. I would also guess that sometimes the buying and selling is just because some people – or funds – need cash.

In theory, this should provide an ideal hunting ground for those seeking good long-term investments. Aero Inventory is forecast by Numis Securities to make earnings per share this year of 83p. The share price earlier this week was 168p. So the share price was only a fraction over two times forecast earnings. Normally my rule of thumb is to say that anything with an earnings multiple of less than 10 is lowly rated. A good company on a multiple of five I would normally regard as extremely good value. But a multiple of two? That is astonishing.

No, gritting my teeth, I won't use the "c" word. But what can you say? It is hard to do justice to how astonishing this kind of valuation is. And it is not as though the company is in any discernible danger. Yes, it is geared but it is profitable and has banking facilities right the way through to 2013. Aero Inventory is an extreme example of the market as a whole.

On the bad side, the chart of the FTSE 100, like the chart of Aero, offers no encouragement. There has been no break in the downward trend. On the other, by any traditional measure, shares are excellent value. The redemption yield on 15-year government stock is currently 3.6pc, whereas the dividend yield on shares is 5.3pc.

Normally, it is the other way around: the dividend yield is lower than the return on government stock for the simple reason that, over time, dividends have historically risen whereas the yield on a government stock does not. True, some companies are reducing or cutting their dividends but this is at the margin. On this method of valuation, as far as I can discover, shares have not been such good value compared to government stock since about 1953.

My view is simple: shares are extremely good value, but it is impossible to know when the turn will come. When it does arrive, from this low valuation, it will be one of the most stunning bull markets any of us has experienced.

[mercury123] 19/3/2009 14:42

Well the fall seems to have stopped and even mildly gone into reverse a couple of times this am so for positively the last time I've topped up again - just think of that divi!

[rat attack] 18/3/2009 16:26

I cannot belive these have now fallen c40% in a month! So we wait and see what the next 6 months bring, but cant help this has more to do with the supposed EK short!

[jr hartley] 18/3/2009 16:15

For me the key to making this business model work long term lies in what they are now (at last!) clearly trying to do from the interim results extract below. They need to focus their efforts on working very closely with their suppliers to ensure they can match purchasing from suppliers to demand from customers as closely as possible. I'm sticking with them at least until I see the full year results for signs of improvement in this area.

They say that , " recently a series of changes has
been made to our planning and purchasing activities to try to ensure that inventory meets as closely as
possible the requirements of our customers."

OPERATIONAL IMPROVEMENTS
We continue to focus on all operational aspects of our business and recently a series of changes has
been made to our planning and purchasing activities to try to ensure that inventory meets as closely as
possible the requirements of our customers. Total purchases in March 2009 are anticipated to amount
to less than US$20 million compared with over US$40 million one year earlier as contracts mature and
we start to reap the rewards of tighter planning and greater stock fungibility. More stocks are being
transferred between sites and the total value of these transfers completed in the period amounted to
over US$50 million.