Aircastle: Current Share Price Hard to Swallow

I have a tough time swallowing the current share price of Aircastle Ltd (AYR). From the year end earnings release, these facts point to a stock that should have a much higher value (Call Transcript).

• Cash flow (adjusted earnings plus depreciation) was $4.53 per share. 1.4 times the share price! The cash flow for the 4th quarter was a very strong $1.24.
• The entire portfolio of aircraft is covered by long term financing. There are no worries about acquiring additional debt.
• The fleet of 130 aircraft have a 98% leased rate with only 2 aircraft needing to be released in 2009.
• The company has a diverse customer base by country and company. The largest customer, KLM, is only 8% of the portfolio.
• The current dividend gives a 12% yield.

I am surprised that someone has not figured out they could buy the company for $250 million and put that amount of money in their pocket for the next 5 years then sell the fleet for half a billion. I think this stock is a steal!

Disclosure: No position

Comments

[Bobhjon:]

Speaking of steals, Yesterday, I sold some $2.5 PUTS on NRF for $1.50. If these are assigned, and I hope they are, I will have bought NRF for $1 / share which is equal to its annual dividend, less than half of its net cash/share, and at a price/book of 0.01. Its book is over $20 share, but since it's both a REIT and a financial, the smart? money is avoiding it. The insiders have been buying it and it has announced that it will pay out 90% of its 2009 income to shareholders.
Steal???

Mar 03 08:54 AM

[optionsgirl:]

What do you think of GLS?

Mar 03 09:00 AM

[jimmy46:]

AYR has 2.7 billion in debt, how much is due this year?

Will they have problems rolling their debt over?

You thought SFL was a steal, the last 2 days it's down about 40%,
what gives there?

Mar 03 03:06 PM

[Warlord:]

Four major debt notes, the earliest is due in 2013. So Jimmy46, the answers:

How much debt is due this year...? Zero. Interest/installment payments only.

Will they have problems rolling their debt over? No. There is none to roll over until 2013 at the earliest.

No clue about SFL, but AYR is indeed a healthy company. The current price reflects a lot of market paranoia, and there's also a built-in weakness in Europe that might be considered for most of the leasing companies.

Cheers,

Warlord

Mar 04 02:27 AM

[shred:]

buy buy buy

Mar 05 10:08 AM

[FreeMkts:]

$14 book value with no maturities for four years and favorable covenants should be more than enough to ride out the credit crunch. Looks like they should be able to pay down at least $200M per year of debt from cash flows while maintaining their reduced dividend. Companies like this should react sharply as credit markets improve.

Mar 30 01:26 PM

[guliamo:]

I'm with you on AYR.. this looks to be a good growth story going down the line. FreeMkts is right - debt shouldn't be an issue as deals are structured well.
The price dropped in the general meltdown panic. What investors didn't realize was that Air Castle actually benefited from airliners (like Air Iceland) that returned air craft. AYR got 3 months payment as a fine plus full refurbish cost and turned around and leased that plane the next month.
I like this company and own shares.
For my complete portfolio view my page at MG:
www.MarketGuru.com/gul...

Sep 03 12:04 PM