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Never mind that CHC Helicopter Corp. (FLI) reported another decidedly tepid quarterly result on Wednesday – Beacon Securities analyst Michael Mills says “now is the time to enter this story” and has raised his rating on the stock from “hold” to “buy.”

He maintained his target price of $26.75, but with the stock down more than 10% over the last three months, he says the stock is compelling at its current valuation.

“We believe CHC is well positioned for sustained growth over the next few years in the tight offshore helicopter market.” he said in a research note.

Oil and gas exploration will continue to go further offshore and into deeper waters, he added in a telephone interview. That means greater flying distances and could mean more flying hours for CHC helicopters.

The company reiterated the same point in a conference call on Thursday, saying it expects a 30% worldwide increase in deep water exploration over the next three years.

The Vancouver-based helicopter services company, which primarily provides personnel transport to the world’s offshore oil and gas industry as well as search and rescue services, reported better-than-expected third quarter revenues of $301-million, a 17% jump from a year earlier.

In the report, Mr. Mills said the company’s global division experienced strong demand for its services, adding work in Australia, Venezuela, Southeast Asia, Africa, and Nigeria during the quarter. Heli-One, the company’s aircraft repair and service unit, had a “terrific” quarter posting total revenues of $139 million.

Gross margins as a whole, however, were a disappointment, he said, noting that this was particularly the case at the company’s European operations. They continue to suffer from new aircraft introduction costs and limited availability of aircraft.

Mr. Mills estimates the cost of not having aircraft ready for service was approximately $2.9-million in the quarter.

Going forward, he doesn’t expect an increase for CHC’s margins until the second half of fiscal 2008.

FLI 1-yr chart:

FLI 1-yr chart

Source: CHC Helicopter Gets Analyst Raise Despite Tepid Results